Auto companies on course to achieve highest monthly output in 2 years

Mumbai: As the auto industry approaches peak festive season, factories are running overtime to churn out more cars and bikes than they did in about two years. About 330,000-340,000 cars are expected to be produced in October, the highest monthly output since January 2019, when the industry recorded output of 364,000 units, according to people with knowledge of the matter. As for two-wheelers, cumulative production is expected to be around 2.37-2.4 million vehicles, the highest in two years. Passenger vehicle output is expected to surge 26% in October, the highest in almost four years, from the same month in 2019. As for two-wheelers, year-on-year growth is seen at 35-40%, the most since 2012. To be sure, the market had been on a slide since September 2018 and the last two festive seasons were a washout, so the growth is on a low base. Demand May Slow After DiwaliHowever, October output for cars and two-wheelers will be higher than it was in September, adding up to six months of sequential growth. September production amounted to 2.44 million two-wheelers and 315,000 passenger vehicles.Almost all plants operated below capacity between April and September amid a disrupted supply chain due to Covid-19, said Gaurav Vangaal, associate director at vehicle forecasting firm IHS Markit. But the level of demand may be moderated after Diwali. “The plant output has been improving month after month post June,” he said. “With the supply chain challenges addressed, the October month is likely to see a peak output of 106% of pre-Covid levels. However, there is course correction expected in November and December as the economic environment still remains weak.”Retail sales exceeded despatches until August, then reversed--vehicle makers added almost 60,000 units to the passenger vehicle inventory in preparation for the festive season in September. The two-wheeler segment too saw dealer inventory moving up from 30 days to 40 days in September with 15 days of the inauspicious Shraadh period slowing deliveries. Vehicle makers are however upbeat. While deliveries slowed last month, bookings and enquiries were robust, giving rise to expectations of a demand-driven festive season.The second quarter has seen a recovery from the year earlier but volumes are still lower than the peak of FY17, Kenichi Ayukawa, managing director of Maruti Suzuki and president of the Society of Indian Automobile Manufacturers (SIAM), told reporters last week.“Both for cars and two-wheelers, there is a strong demand. The entire focus is on producing more under Covid conditions,” he said. “There is an inventory push before the festive season, but it is a normal exercise. It will be a good festive demand, a decade-low interest rate of 8% is a big positive.”He however cautioned that it’s still too early to judge whether the recovery is sustainable. “We will have to wait for the January-to-March quarter,” he said.78740244The daily production rate of two-wheelers has been around 78,000 units in October compared with 47,211 and 60,000 in July and August, respectively.A leading vendor to two-wheelers companies indicated that it’s working at an all-time high monthly production rate. Cable vendor Suprajit Engineering told stock exchanges that it recorded the highest ever sales in the second quarter in the history of the company and October is expected to be stronger based on customer schedules across the group.

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