Auto, tractor companies build inventory ahead of Diwali

Mumbai: Automobile and tractor manufacturers are stepping up production as they build inventory ahead of the main festivals, on hope that the momentum in demand seen since last month would pick up further ahead of Diwali. Companies such as Maruti Suzuki, Hyundai Motor India, Mahindra & Mahindra and Toyota Kirloskar are going full steam ahead on building stock.

The current inventory with dealers is lower than last year, so they are also ramping up capacity utilisation to have adequate stock during the festive season. “Automakers are hesitant to give future projections, but are in a way preparing for the upcoming festive period,” Maruti Suzuki executive director Shashank Srivastava said. While the going is good, any re-imposition of local lockdowns could affect sales, he said.

Passenger vehicle sales rose in healthy double digits on-year in August, which the industry attributed to demand for personal mobility, strong rural buying as well as a base effect as sales were low last year. Manufacturers expect most of these factors to remain strong in the coming months and boost sales especially during Diwali, which is in mid-November this year. They are particularly upbeat about the rural sector, which has remained largely unscathed by the pandemic amid a bumper crop, remunerative prices to their produce and plentiful rains this year. “With two weeks’ delay in festive season this year, we are gearing up to build inventory and be ready to meet the festive demand,” said Hemant Sikka, the president of Mahindra’s Farm Equipment business.

The company is working at 100% capacity utilisation for its tractors and hopes to ride the momentum. In August, its tractor sales rose 69% from a year earlier. Lower-end cars continued to see strongest demand, Srivastava of Maruti Suzuki said, suggesting the demand from rural areas and from middle-class families who are apprehensive of using public transport due to Covid-19 and are looking for personal mobility. For passenger vehicles, the stock level at the beginning of this month was around 175,000 units, compared with 306,000 a year earlier. This is 25 days of inventory and ideally the industry should have stock for 30 days, said experts.

However, this year’s rather prolonged inauspicious period of 45 days, till mid-October, is providing room for manufacturers to build inventory before buyers return to the market. “We see the need is now for personal mobility and many customers may be in a hurry to have their vehicle and may not want to wait till Navratri to take delivery,” Hyundai Motors India sales & marketing director Tarun Garg said.

The local unit of Korea’s Hyundai Motor currently operates its two plants near Chennai on three shifts and is seeing good traction. Component suppliers said production reached pre-Covid levels in August and the order pipeline continued to be encouraging. Automobile dealers said the northern, central and western markets were expected to throw up the highest numbers this festival season.


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