UPDATE: Two-wheeler retail sales fall 8.3% in August despite strong factory dispatches; Hero MotoCorp shares drop 4-6% as motorcycle and export volumes decline
3 Sept, 04:32 IST · Plays out over weeks · 7 sources
Carmakers and bike makers shipped a lot of vehicles to dealers in August, but far fewer were actually bought by customers - retail two-wheeler sales fell 8.3%. That means unsold stock is piling up at dealerships, which usually leads to smaller orders in the months ahead.
Key facts
What the reporting establishes, before any reading of it.
- Two-wheeler retail registrations fell 8.3% year on year in August, with Hero, Honda and Bajaj bearing the brunt of a festival-season slowdown
- Hero MotoCorp shares fell 4-6% after August data showed year-on-year declines in both motorcycle dispatches and exports, with only scooters growing
- The Nifty Auto index fell over 2%, with crude oil above USD 94 a barrel adding a second drag on two-wheeler running costs
- This updates the 2 September event on August auto sales, which read the strong wholesale numbers as broadly positive for two-wheeler makers
How the news spreads
Step by step — from the first companies it hits to whole sectors.
Who it hits first
- Two-wheeler retail registrations - vehicles actually bought by customers - fell 8.3% year on year in August, with Hero, Honda and Bajaj bearing the brunt of a festival-season slowdown.
- Hero MotoCorp shares fell 4-6% because its August detail was weakest: motorcycle dispatches and exports both declined year on year, with only scooters growing.
- The Nifty Auto index fell over 2% as the retail data contradicted the strong wholesale dispatch numbers reported a day earlier.
Who may gain
- Premium motorcycle makers, principally Eicher Motors' Royal Enfield, whose volumes still grew 11% because premium buyers are less sensitive to fuel prices and loan rates.
- Exporters within the group, notably Bajaj Auto, whose overseas volumes are unaffected by Indian retail softness.
- Used-vehicle platforms and vehicle financiers' repossession channels, which gain supply when new-vehicle demand stalls.
Along the supply chain
Downstream
Downstream is the dealer network and then the rider. Dealers are carrying more unsold stock than the wholesale figures imply, so they will discount to clear it, which compresses their own margin and pressures manufacturers for support. Riders benefit from those discounts in the festive season. Vehicle financiers see slower new-loan origination as fewer vehicles are actually registered.
Upstream
Auto component suppliers - forgings, castings, motors and electricals - work off manufacturers' production schedules, not retail sales. Because dispatches were strong in August, component demand was strong too. The correction comes with a one-to-two month lag: when manufacturers cut September and October production to let dealer inventory clear, component orders fall with it. That is why the propagated list is dominated by component makers rather than by the vehicle makers themselves.
Where demand moves
Business
The demand that manufacturers booked as August sales has not reached a customer - it has stopped at the dealership. Dispatch numbers count vehicles shipped from factory to dealer; registration numbers count vehicles bought by riders. An 8.3% fall in the second while the first grew means dealer inventory is building. Dealers finance that inventory, so their carrying cost rises and they cut their next order. That order cut lands on manufacturers in September and October, which is why the equity market reacted to the retail number rather than the dispatch number.
How it spreads across sectors
Automobile and Auto Components
Dealer inventory build points to a September-October production cut, which flows through to component suppliers with a one-to-two month lag
Financial Services
Vehicle financiers see slower loan origination volume as registrations, not dispatches, drive lending
When it plays out
Immediate
Two-wheeler makers and their component suppliers de-rate over the next few sessions, with the most expensive names falling hardest.
Medium term
Over one to six months the festive season decides it. A strong Navratri-Diwali retail season absorbs the inventory and this is a false alarm; a weak one turns a channel problem into an earnings problem, with crude above USD 94 a barrel raising running costs for exactly the price-sensitive buyer who has already stepped back.
Short term
Over one to four weeks the September dispatch numbers are the test. If manufacturers hold dispatches while retail stays weak, inventory builds further and the correction gets larger; if they cut, the September numbers look bad but the channel clears.