Recovery in auto sales pent-up demand; not sustainable: MG Motor

The recovery seen in auto sales in the past couple of months is not a sustainable one and there is a question mark on how the industry would fare next year as the sector is hugely linked to the economy, according to MG Motor India President and MD Rajeev Chaba.

Following the reopening of the economy after lockdown, auto sales have gradually picked up month on month since June and gained further momentum with the onset of festive season in September.

"We should not think this is a sustainable recovery. This recovery is very tactical because of pent-up demand, because of lockdown, because of some shifting from public transportation to private transportation and maybe some very few people who just want to buy cars now because they want to have some feel good factor," Chaba told.

He said the market is coming back to last year's level in August and September although the April-June quarter was a wash out.

However, Chaba said, "This is all tactical but sustainable demand or the robust demand depends on the economy. Automotive industry is hugely linked with the economy of the country and vice versa. Auto industry helps the economy and the economy helps the auto industry."

Sales in September, October, November and December will be fine but still industry will be down by 23-25 per cent overall for the full year, he said adding, "From January onwards, it will depend on the robustness of the economy and the positivity of sentiments and certainty around (COVID-19) vaccines, and maybe government's stimulus further to the economy and may be to the auto industry as well."

"That's why I have my fingers crossed from January onwards," he added.

Some automakers had said that there are 'green shoots of recovery' in the industry based on the performance in September, when auto majors Maruti Suzuki, Hyundai Motor led the recovery march of passenger vehicle (PV) sales in the domestic market posting high double-digit growth.

Tata Motors, Honda Cars India, Skoda Auto India, Kia Motors India also witnessed robust increase in their September sales. While companies like Mahindra & Mahindra and Toyota Kirloskar Motor saw decline in sales, they said demand is picking up and there is a lot more confidence in the dealers.

The manufacturers are banking on festive season demand to carry forward the momentum.

Commenting on the MG Motor India's position, Chaba said since the gradual lifting of the lockdown, the company has been inching up towards normalcy.

"We are almost 80 per cent of pre-covid levels in terms of normalising the supply chain as well as demand. Luckily we still have some orders and we are able to do around 3,000 cars a month right now. In terms of demand, it is almost pre-covid level for us," he said.

He further said, "We still have around 9,000 orders for both Hector and ZS EV. So hopefully by October in terms of supply chain, it should be pretty normal, unless COVID-19 plays on its own and it deteriorates. Otherwise, we are on the path of good recovery."

Also read: MG motor records 2.72% decline in September retail sales