As India’s annual festive season takes off with the 10-day Onam festival, hopes are high at the country’s automobile manufacturers, at a time of rising rural sentiments and fading supply chain woes. Sales of both passenger vehicles (PVs) and two-wheelers are expected to be significantly higher this year, according to industry executives.
The festive season traditionally begins with the Chingam, the beginning of the Malayalam new year. This year, it extends from 17 August till 14 November, a total of 83 days. India saw its highest festive season PV sales of 934,000 units in 2021, when the season stretched to 92 days.
According to industry executives, the festive season has historically witnessed a pattern of demand peaks across different regions and festivals, with Onam marking the beginning of the period. “Right now, the intensity (of the festive season) has kicked off with Onam, which happens in Kerala and some parts of Tamil Nadu—that’s the start,” Shashank Srivastava, senior executive director, Maruti Suzuki India Ltd, said.
This year’s festival calendar seems promising with a consistent chain of festivals across regions, contributing to the anticipated upswing in sales, he added.
Onam celebrations will be followed by Ganesh Chaturthi in Maharashtra and Gujarat, Durga Puja in the East and Navratri in the North, followed by Diwali, Dhanteras and Bhaidooj in the northern and central India.
Srivastava highlighted the possibility of PV sales crossing the 1-million unit mark this festive season for the first time.
“In Kerala, since 17 August, we have seen a 17% increase in new bookings and a 45% rise in retail sales. It is a happy coincidence that we are able to deliver many more vehicles and fulfil pending orders from the past also during this time, which is all contributing to high growth in our retail sales,” he told Mint.
According to him, the PV industry saw retail sales of 853,000 units last year, and this year, at 1 million units, it could be over 17% more year-on-year.
For the auto industry, the festive season accounts for a quarter of the year’s total sales (23-26% of total sales on average over the past four years).
Hyundai Motor India Ltd, the country’s second-largest carmaker, said it expects high single-digit growth in the festive period for the company, indicating a consistent inflow of fresh demand, even as waiting periods for popular models come down with falling chip shortage concerns.
“This time, the festival track is different from the last two years. The last two years, it was about the shortage of semiconductors on one side in terms of supply, and it was about pent-up demand in the fourth quarter on the other side. But this time, one, the semiconductor issue is more or less over and supplies are much better. At the same time, the pent-up demand is not there. But fresh demand is robust,” Tarun Garg, chief operating officer (COO), Hyundai Motor India, said.
“In 2021, in Kerala, we retailed 4,073 units put together for August and September, which grew to 4,354 units in 2022 and this year, we could end up somewhere in the ballpark of 4,800 units, which is a nearly 8% growth over last year. So, the demand is quite good and especially since we launched the Exter, the demand continues to be very strong for the product and that is also helping us. A good Onam is a very good sign for the industry and we are hoping that the retail would be good because of better supplies, especially compared to the last two years.”
However, there are potential dampeners as well. One of the primary factors is the monsoon, which is currently at an 8% deficit but could be balanced or impacted further depending on September rains, Srivastava said. The state of rural sentiment is closely linked to the monsoon and a shortfall could hurt.
Nikunj Sanghi, president, the Automotive Skills Development Council (ASDC) and chairman of the JS Group, which owns one of the largest Hero MotoCorp dealerships in Rajasthan, pointed out that food inflation, which is consistently high, is also a concern. The potential for a rate hike by the Reserve Bank of India due to elevated food inflation could affect the auto industry, where retail financing makes up a significant portion.
Still, rural sentiment remains positive at present, Sanghi said, adding there has been a notable improvement in sales of entry-level two-wheelers as well, a segment that has been struggling for the past many quarters. “We could see a single-digit improvement in two-wheeler sales but it will not be anywhere near the peak festive season sales we have seen before covid-19,” Sanghi said.
With waiting periods becoming more manageable due to improved semiconductor supplies, the auto industry is gearing up to fulfill pending orders and meet fresh demand during the festive season. Discounts are expected to remain at similar levels to last year, with manufacturers focusing on meeting demand for new models and optimizing production, Hyundai’s Garg told Mint.