Automakers step on the gas as state govts begin to unlock – Mint

Maruti Suzuki India Ltd, the country’s top carmaker, is expected to produce 165,000-169,000 vehicles in June, increasing it to 174,000 vehicles in July, the people cited above said. The Suzuki Motor Corp. unit made 157,585 vehicles in April when India was in the grip of the deadly second wave of the pandemic.

Also, Tata Motors Ltd plans to boost passenger vehicle production to 25,000-30,000 units by July, the people said. The Mumbai-based automaker has been encouraged by a decline in infections in Maharashtra and Gujarat.

Second-ranked Hyundai Motor India, though will have to limit production to just 47,000-48,000 vehicles in June, including exports, as the company has not been able to add a third production shift at its factories due to the prevailing high number of covid cases in Tamil Nadu. The South Korean firm produced 57,100 vehicles in April.

Automakers have been encouraged by factors such as prevailing high order book and growing preference for personal mobility in both rural and urban areas to avoid infections. With dealer stocks at most passenger vehicle makers currently at less than a month, companies are pushing to step up production as they expect sales to recover from August once economic activity gathers pace.

Companies such as Maruti Suzuki, Mahindra and Mahindra and Tata Motors are also expected to benefit from a good summer crop this year, which may lead to a faster-than-expected recovery in the rural and semi-urban markets.

“At the end of last week, Maruti’s run rate was around 6,400 vehicles, and before production was stopped due to the second wave, the daily production was around 7,000 vehicles. They think the market will rebound strongly from August, and preference for personal mobility and vaccination will help push sales,” one of the two people cited above said. “The supply chain also did not get disrupted as much as it did last year”.

The person said Tata Motors has begun ramping up production at its factories in Gujarat and Maharashtra as it already has a strong order book.

A spokesperson for Maruti Suzuki declined to comment. Emailed queries to Tata Motors and Hyundai on Tuesday remained unanswered.

Automakers are hoping that, like the first wave, customers will begin flocking to showrooms after the second wave recedes. Experts, however, cautioned that the second covid wave claimed a record number of lives and made a sharp dent in consumer sentiment, which may lead households to trim their expenditures, especially on discretionary purchases in the short term.

The auto industry came under pressure from the first week of April when Maharashtra began strict lockdown measures. Delhi, Haryana, Karnataka, Tamil Nadu and others followed suit. Maruti Suzuki, Hero MotoCorp Ltd, Hyundai and others either stopped production or reduced output significantly.

Some like Bajaj Auto Ltd, however, continued to operate with limited capacity to meet export orders. With a steady drop in infections, especially in north and south India, most automakers have resumed operations from the middle of May.

“Companies in the southern states like Hyundai are not able to manufacture as much as they want and are now able to function with two shifts instead of three. Also, due to the high caseload there, employees are also reluctant to join work. So, an increase in production there might depend on when the states unlock. Most of these companies are confident of a good recovery starting with the festive season,” the second person cited above said.

“We expect a stronger FY22 on a very low base of H1FY21. However, the growth will be lower than our earlier expectations as the second wave of the pandemic has hit the country badly. Therefore, retail as well as wholesale numbers will be impacted at least in Q1 of FY22. We are, however, expecting a strong bounce back in Q2FY22 across the segments as Wave #2 is expected to subside,” analysts of LKP Securities said in a note.