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Auto demand patchy across segments, don’t expect huge discounts this festive season: CRISIL

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Auto demand patchy across segments, don’t expect huge discounts this festive season: CRISIL

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According to CRISIL survey, the expectations in terms of demand is fairly patchy across all the three verticals and across the regions as well. If one were to look at the regional disparity, dealers in the north are slightly more pessimistic than their counterparts in different markets like east and west.

Auto stocks are on the radar because the August sales number from the companies will be released on September 1, while the commodity prices continue to rise, prompting auto companies to raise prices. Maruti Suzuki has hiked prices yesterday for the fourth time this year.

Crisil has done a survey of auto dealers showing the demand scenario since we have entered the festive season, CNBC-TV18 spoke with Bhushan Parekh, Director-SME Solutions, CRISIL.
He said the survey included about 120 auto dealers spread across two-wheelers, passenger vehicles and commercial vehicle segments. According to the survey, the expectations in terms of demand is fairly patchy across all the three verticals and across the regions as well. If one were to look at the regional disparity, dealers in the north are slightly more pessimistic than their counterparts in different markets like east and west, he said.
Meanwhile, the two-wheeler segment is actually something that is quite upbeat as it was last year as well. However, people are slightly more cautious this time in this segment, said Parekh adding that at an overall level, even if the demand increases, the dealers do not see the demand surpassing the 2020 levels.
Throwing further light on the demand picture, he said, “If I look at specific segments to play COVID, I would say overall in terms the two-wheeler segment, we are expecting close to around 15 to 20 percent increase. The passenger vehicle segment which is relatively better off as compared to commercial vehicle and two-wheelers where the demand expectation is fairly constant.
In terms of the last year's demand decline, we did not see that much of a decline as well. So on the PV segment, it would be early teen’s kind of demand revival. While the commercial segment is again something which possibly will be slightly lower. But again, positive single digits to maybe around 10 to 12 percent.”
When asked about dealer inventory, he said, "One of the good things that happened prior to the second wave as compared to the last year’s lockdown is that we have seen a lot of support provided by OEMs by not pushing a lot of inventory down to the dealer value chain.
The dealer inventory levels, which used to be at around more than 60-65 days, prior to the COVID levels, it is drastically coming down to below 45 days. Most of the dealers are keeping their inventory levels at close to a month or a month and a half at maximum, which is what will help them because they would not be blocking a lot of their funds, said Parekh, adding that it would also help to give them a lot of flexibility in not providing discounts and not looking at larger inventory turnovers.
He expects little discounts to be offered this festive season, but overall across models, he expects price increases to take place as the raw material prices have shot up.
"So discounting is something that possibly will happen in a very patchy way and lower inventory levels definitely should help dealers not give a lot of discounts," he added.
For the full discussion, watch video
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