June 2024 Auto Wholesales Report: Trends and Insights

Mixed bag; Retails slowed down in June

In June 2024, the domestic passenger vehicle (PV) segment saw low single-digit growth in wholesale volumes despite high inventory levels, while commercial vehicle (CV) and tractor wholesale trends remained flat year-on-year (YoY). Domestic two-wheeler (2W) wholesale volumes grew by low double digits, though exports were weak. Overall retail sales declined by single digits YoY due to a heatwave, despite increased foot traffic post-elections. Strong SUV sales drove a 4% YoY increase in PV sales, although entry-level cars were weak. Maruti Suzuki and Mahindra & Mahindra met expectations, with strong MSIL exports, while Tata Motors underperformed. The 2W industry grew by 11% YoY, driven by rural recovery, while exports fell. Hero MotoCorp exceeded estimates, and CV sales fell by 4% YoY but rose 6% month-on-month (MoM). The CV industry’s demand was strong, with expected mid-single-digit growth for FY25. Bajaj’s three-wheeler domestic wholesales grew by 16%, while TVS and M&M saw declines. Tractor sales recovered, with M&M and ESC exceeding estimates. PVs and CVs are projected to have mid-single-digit volume growth from FY24 to FY26, while the 2W industry is expected to achieve high-single to low-double-digit growth.

Passenger Vehicles

In June 2024, the passenger vehicle (PV) segment saw mixed demand after an initial boost in April due to festivities. Factors like a high base, fewer customer walk-ins, and deferred purchases until the festive season led to increased inventory levels, with over 5 weeks in the North and about 4 weeks in the South, and high discounts in some segments. Maruti Suzuki’s wholesale volumes reached 179,200 units, a 12% YoY increase, thanks to strong exports which surged 57% YoY to a record 31,000 units. Tata Motors’ wholesales of 138,682 cars and SUVs in Q1 FY25 were flat compared to Q1 FY24, as they matched wholesales to retail demand to maintain inventory. Mahindra & Mahindra’s UV volumes grew 11% YoY to 59,900 units, driven by a 23% YoY growth in UVs. Tata Motors’ PV volumes declined 8% YoY to 43,600 units due to reduced wholesales to manage inventory amid weak retail demand, with EV sales dropping 34% YoY to 4,657 units due to the end of the FAME2 subsidy in March 2024. Despite challenges, the company is optimistic about a demand increase supported by strong inquiries and the upcoming festive season. Hyundai Motors saw flat growth, while Toyota India posted a 44% YoY growth in June 2024.

Two Wheelers

In June 2024, the domestic two-wheeler (2W) wholesale segment exceeded expectations, showing high single-digit year-on-year (YoY) growth. The 2W market sentiment was positive, with semi-urban and rural areas growing faster than urban areas for the fifth month in a row. Electric two-wheeler retail sales surged by 72% YoY, due to a low base from the previous year’s reduction in FAME II incentives. Hero MotoCorp’s volumes improved by 15% YoY, and TVS Motor reported a 6% YoY increase in 2W volumes, driven by strong domestic sales. Royal Enfield’s volumes declined by 5% YoY due to a 27% YoY drop in exports, while Bajaj Auto’s volumes grew by 5% YoY. Export demand was weak, with high single-digit declines in volumes. TVS Motor’s export dispatches fell by 3% YoY to 66,400 units, while Bajaj Auto saw a 7% YoY increase to 177,200 units, albeit from a low base. TVS Motor mentioned that export dispatches were impacted by lower container availability due to the Red Sea crisis.

Hero MotoCorp is strengthening its presence in the 125cc, premium, and electric vehicle (EV) segments, with strong demand for models like the Xtreme 125 and VIDA V1. In June, the company achieved its highest-ever dispatches for the VIDA V1 and plans to expand its EV portfolio with new products in the mid and mass segments this fiscal year. Hero MotoCorp also saw impressive 44% growth in its global sales during Q1 FY25, driven by expansion in Nepal, growth in Colombia and Mexico, and increased market penetration in Turkey. TVS Motor and Honda Motorcycle & Scooter India (HMSI) announced a price increase of around Rs 1,000 per unit effective July 2024 across their product lines. There is positive market sentiment and high expectations for Bajaj Auto’s upcoming CNG bike, expected to be part of the Platina family, which is anticipated to gain strong traction due to its attractive total cost of ownership, especially in urban areas with more CNG stations.

Commercial Vehicles

In June 2024, domestic commercial vehicle (CV) volumes declined by mid-single digits year-on-year (YoY) due to weakness in the medium and heavy commercial vehicle (M&HCV) truck segment. Tata Motors’ domestic CV volumes fell by 7% YoY, with a 3% drop in M&HCV trucks and a 21% YoY decline in small commercial vehicle (SCV) cargo, partly offset by an 18% growth in the bus segment. Ashok Leyland’s volumes decreased by 2% YoY, while VECV’s volumes increased by 11% YoY. Tata Motors indicated steady demand for heavy commercial vehicles (HCV) and positive market sentiment for the medium commercial vehicle (MCV) segment, with increased demand in e-commerce, auto parts, and LPG segments. Bus demand remained strong, but SCV sales declined in Q1 FY25 compared to Q1 FY24, mainly due to financing challenges for first-time users. Fleet sentiment was positive, especially post-elections, due to government stability. Favourable net pricing improved profitability for CV manufacturers, with Tata Motors and Ashok Leyland achieving EBITDA margins of about 11-14% in Q4 FY24, up from 10-11% in the first nine months of FY24. However, dealers reported a slight increase in discounts in June 2024, and OEMs plan a price hike in July to offset this. Looking ahead, CV demand is expected to remain steady, supported by a good monsoon forecast, policy stability, and ongoing infrastructure development. Mid-single-digit growth is anticipated for FY25 due to a high base effect, low fleet capacity utilisation, and moderate replacement demand in the M&HCV truck segment.

Tractors

In June 2024, domestic tractor industry volumes grew by low single digits year-on-year (YoY), driven by increased Minimum Support Prices (MSPs) for Kharif crops and inventory buildup. However, June rainfall was 11% below the long-term average, and the progress of the monsoon needs to be monitored. Mahindra & Mahindra’s (M&M) tractor volumes increased by 6% YoY to 47,300 units, exceeding estimates. M&M noted that positive farmer sentiments were boosted by the government’s announcement of increased food grain production, higher MSPs for major Kharif crops, and the advancement of the Southwest monsoon. Retail momentum has picked up, supported by land preparation and increased Kharif crop sowing, indicating strong demand for tractors in the coming months. Conversely, Escorts’ tractor sales declined by about 3% YoY to 9,600 units but still exceeded estimates. Escorts’ management observed a delayed pick-up in retail sales in its key market. However, with good monsoon progress and continued government support, Escorts expects demand to improve in the coming months. Construction activities are currently slow due to the favourable monsoon progress and the formation of the government post-elections. Nevertheless, with the government’s ongoing focus on infrastructure development, demand is expected to improve after the monsoon season.