Lockdown restrictions to hit auto sector; April sales may see double-digit decline

Lockdown restrictions to hit auto sector; April sales may see a double-digit decline

Auto sector: As the COVID situation continues to decline in India, auto sales may take a significant hit in April given regional lockdowns, supply constraints, and lower footfalls. While experts see it as a short-term hindrance as they expect sales to rebound sharply once the situation is constraining.

Moreover, as for April, experts expect a double-digit decline across all segments, be it passenger or commercial, in both urban and rural markets. Our interactions with leading channel partners indicate a sharp decline in month-on-month retails led by regional lockdowns. Supply challenges for few original equipment manufacturers (OEMs), and lower footfalls in the key festive season, Prabhupada’s Lilladher said.

Unlike last year, this time rural sales are also impacting as retails, the auto sector and urban are respectively. Consequently, we expect wholesale for April 2021 to decline 15-20 percent, MoM, across segments, the brokerage added. Motilal Oswal also feels their interaction with leading industry channel partners reflects caution.

While passenger vehicle demand momentum has slowed, with people postponing their purchases. Demand for medium & heavy commercial vehicles (M&HCVs) remains strong in the infrastructure segment. While the cargo segment has slowed down, the brokerage explained.

Passenger Vehicles

Channel check suggests passenger vehicle retails to decline 35-40 percent MoM across OEMs. On the other hand, booking has also declined by 30-33 percent, said Prabhudas Lilladher. Adding key states such as MP, UP, Tamil Nadu, and other Northern parts carried momentum till last month, have now been impacted the most due to COVID restrictions.

While some states such as Gujarat, Rajasthan, MH, and Karnataka continue to remain weak. Motilal Oswal also sees new bookings for passenger vehicles declined by 30-50 percent. However, cancellations to be around 10 percent. Volumes are expected to decline by around 5 percent MoM for Maruti Suzuki, 3 percent MoM for Mahindra & Mahindra, and 19 percent MoM for Tata Motors, said the brokerage.


2-wheeler sales have been the worst hit as they missed the mini festive. And marriage season, resulting in inquiries declining by around 50 percent. Rural demand is still better than urban due to a bountiful Rabi harvest. Dealers are holding 1-2 months of inventory.

We expect 2-wheeler wholesales for Bajaj Auto to fall by 6 percent MoM, TVS Motor by around 20 percent. Hero MotoCorp by around 22 percent, and Royal Enfield by around 6 percent, said Motilal Oswal. Prabhudas Lillader said channel checks suggested continued weak demand momentum for 2-wheelers with an expected decline of 53-55 percent MoM.

Inquiries during the month were lower for both urban (60-62 percent MoM) and rural (43-45 percent MoM). This was largely led by

  • Lower/negligible sales during marriage season in key states like UP, Raj, MP, Bihar, etc.
  • 50-55 percent lower footfalls during Navaratri/Gudi padwa and
  • Selective financing said the brokerage.


Prabhudas Lilladher said commercial vehicle retails may decline by 30-32 percent MoM in April 2021 largely led by COVID restrictions, labor shortage in states, supply shortage.

However, MHCV demand is better placed than SCV/LCV as there have been no major restrictions. On the movement of steel, cement, capital goods, etc. Resulting in continued momentum for tippers and trailers. And the financing situation also remaining favorable as captive NHFCs are more aggressive, said the brokerage.

Motilal Oswal also said as most commercial vehicle dealerships are on highways. They are the least impacting by the lockdown. And LCV and SCV demand has also slowed due to restrictions on the sale of non-essential goods by e-commerce players in certain regions. The brokerage expects Ashok Leyland’s wholesales to decline by around 27.5 percent MoM, Tata Motors by around 21 percent.


Prabhudas Lilladher expects a 33-35 percent MoM decline in retails for April 2021 largely due to lower footfalls throughout the month. Which the brokerage believes is a temporary phenomenon. The brokerage further believes demand sentiments for tractors continue to remain healthy as local mandis are still operating. A healthy monsoon will help demand in the sowing season and the availability of better finance.

On the other hand, as the supply chain keeps improving followed by lower retails. During the month, inventory levels continue to inch up to 4-5 weeks, said the brokerage which sees channel filling to continues for the entire Q1.


Motilal Oswal prefers companies with a) higher visibility in terms of demand recovery, b) a strong competitive positioning, c) margin drivers, and d) balance sheet strength. Maruti Suzuki and M&M are its top OEM picks and Tata Motors as a play on global passenger vehicles.

Moreover, Prabhudas Lilladher prefers Ashok Leyland as MHCV volumes will recover by the first half of FY22. And M&M is well placed to grow in FY22 due to a healthy outlook for the FES segment led by healthy farm sentiments and a strong rural presence benefitting UV sales.

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