Wholesale dispatches for the auto industry are climbing back to 2019 levels. Is this a good sign or a false dawn?

When reports from the automotive industry came early in August, they were reassuringly positive. The country’s largest carmaker, Maruti-Suzuki, said that wholesale dispatches to dealers were up by one per cent from July 2019. The country’s second-largest carmaker, Hyundai Motor India, registered a decline of two per cent for domestic dispatches. While both carmakers have showed a considerable decline in exports, other producers, too, displayed a relatively healthy number of wholesale dispatches for July 2020 compared to July 2019. Even two-wheeler companies, Hero Motocorp, Honda and TVS, showed considerable numbers in July 2020, almost matching July 2019 numbers and importantly climbing significantly over sales in June 2020. And in a sign that the rural economy is picking up, tractor sales for July 2020 continued to surpass expectations, showing double-digit growth for all leading manufacturers.

However, there are some signs that things have not all returned to normal. Commercial vehicle sales are still muted, with transporters still having excess capacity. With educational institutions and public transportation services limited, there has been almost no offtake of buses in the past four months. One must draw attention to the difference between wholesale and actual retail sales; the latter are yet to recover. While most manufacturers have managed to get their production in order, thanks to special permissions even in lockdown zones, retail sales have been hit as dealerships have had to stay closed on days when cities, districts and even whole States endured lockdowns. What must also be remembered is that the entire automotive industry was suffering in 2019. Sales had been muted as the economy was still sputtering. In fact, last year, sales were down sharply from 2018. One should wait and watch to see how actual retail sales in the months of August and September pan out. These are historically weak months leading up to the bonanza of the last three months of the year, the so-called “festive season.” And while it is encouraging to see that auto manufacturers have managed to get their houses back in order, much more needs to be done for the entire economy to get back on track after the Wuhan virus derailed all hopes of growth. These might be green shoots but they may not be enough to ensure that the plant called the economy grows big and strong by 2021.