With high August sales, has Indian auto sector entered the fast lane?

As the pandemic ebbed and the supply of semiconductors came closer to normal, the production and sale of passenger vehicles hit the fast lane in India. And it rose to new levels this August, year-on-year.

Led by SUVs, the sales may hit another peak in the coming festive season. Monthly sales data released last week showed that dispatches at the top seven passenger vehicle makers rose 30.2 per cent year-on-year to 3,05,744 units from 2,34,743 units.

With the exception of May when the growth came on the back of a low-base effect, this was the sharpest year-on-year growth witnessed in FY23. Auto firms count dispatches to dealers as sales.

Shashank Srivastava, the executive director - sales at Maruti Suzuki, expects the industry to end FY23 with a record 3.7 million units, which would be almost 21 per cent more than FY22. Clearly, the sector is in the middle of a passenger vehicle sales boom that is likely to continue in the coming months.  

Maruti’s August dispatches in India grew 30 per cent over the corresponding month a year ago. According to Srivastava, the growth trend appeared to be strong, but performance going forward would be decided by how production pans out against underlying demand. He cautioned that while the chip shortage situation had eased considerably, some uncertainties still existed, particularly for specific models. Up to last week, the pending bookings at Maruti Suzuki stood at 377,500 units. But, the real question is how long can the sector expect this party to last?  

Srivastava added that the August sales trend indicated that while growth momentum was continuing in the SUV segment, it had plateaued for sedans.

Tata Motors saw its PV sales continue the strong run of the previous months with a 68.3 per cent year-on-year jump in August. Mahindra and Mahindra saw continuing momentum thanks to new SUV launches, with sales advancing at a brisk pace of 87 per cent over the corresponding month last year.

The Scorpio-N, Scorpio Classic and Bolero MaXX Pik-up models have been driving the volumes. Sales at Toyota Kirloskar Motor increased by 17.12 per cent year-on-year in August. According to a company executive, the Innova Crysta, Fortuner and Legender models witnessed unprecedented customer orders that month. The company recently said that it was putting a temporary freeze on orders for Innova Crysta's diesel variant as the demand for it was huge, leading to longer waiting periods.

Struggling for years, two-wheeler sales also saw a year-on-year uptick in August, though it came on a low base. The increase came as companies dispatched higher numbers ahead of the festive season. In their case, too, an easing in the chip shortage helped increase production.

The good news in August comes after a long spell of difficulties for the industry. In 2017, things began getting hot under the collar for the industry. For starters, growth was affected by the implementation of the goods and services tax. Second, just before the Covid-19 pandemic struck, the industry was worried about the imposition of BS6 emission norms, which would mean increased prices for consumers and significant investments by firms in cleaner technology. The onset of the pandemic almost came as the last straw on the camel's back. Factories, showrooms and supply chains were shut down overnight due to the lockdowns. Auto firms had to scramble to adapt and survive. It's been a long road to recovery.