Auto Sales Preview: Festive Inventory Build-Up To Boost Sales In August, Say Analysts

Auto dispatches to dealerships got a boost in August as companies looked to build up inventory amid expectations of higher sales during the ongoing festival period.

The festival season, which started with Onam earlier this month and ends with Bhai Dooj in November, contributes significantly to the automakers' annual sales.

"We estimate wholesalers are likely to benefit from inventory build-up before the festive season," Nomura said in a report. Analysts said the dealers are anticipating strong festive demand this year.

While the inventory push is likely to benefit all segments of the industry, the existing underlying factors within each category are also expected to impact sales.

Retail sales of two-wheelers witnessed growth in August, helped by stable demand in the urban markets and a gradual recovery in the rural ones.

"Our checks suggest urban volume growth has been in the range of 5%–7% YoY, while rural growth has been 3%–5% YoY," Motilal Oswal said.

However, weak exports may lead to a decline in the wholesale sales of Bajaj Auto Ltd. and TVS Motor Co., according to an average of estimates by three brokerages, including Motilal Oswal, Nomura, and Dolat Capital.

Passenger vehicle sales are expected to grow due to a huge pending order book and the easing of supply chain issues, which have led to an improvement in deliveries to bring down the order backlog.

While demand for SUVs remains strong, hatchbacks are likely to continue in the slower lane, analysts said.

In the commercial vehicle segment, medium and heavy category vehicles will continue to drive growth even as overall discounts rise.

Retail sales of medium and heavy commercial vehicles are expected to grow by 4%–6% YoY during the month as freight demand is likely to improve post-monsoon due to the upcoming festive season, Motilal Oswal said.

Tractor sales are also expected to rise due to crop realisations holding up and healthy reservoir levels.