From The Economic Times · Veer Sharma · · 2m
Auto sales surge in September but GST base clouds picture
September auto sales jump as rural monsoon weakens tractor demand.
In brief
September auto sales jump as rural monsoon weakens tractor demand. India's auto sales rose 21.4% year-on-year in September but weak monsoons reduced tractor sales by 21% and rural demand, raising concerns for Q2 stock performance. Originally reported by The Economic Times.
September auto sales mixed
September delivered a mixed reading for India’s auto sector at a time when the broader stock market reeled under uncertainty, extending its losing streak to eight straight weeks for the first time in 25 years.
Auto stocks declined sharply
Bajaj Auto closed 8% lower, Mahindra & Mahindra slipped to a 52-week low, while Escorts Kubota declined up to 5%. TVS (down 3%), Hero MotoCorp and Ather Energy down 1%.
Passenger vehicle sales up
Domestic passenger-vehicle sales jumped 21.4% year-on-year to 4,63,081 units, while Tata Motors’ commercial-vehicle volumes rose 31%.
Tractor sales fell sharply
Mahindra & Mahindra’s tractor sales fell 21% year-on-year to 52,100 units, while Escorts Kubota’s tractor sales declined 16.7%.
Two-wheelers show weakness
Bajaj Auto’s domestic two-wheeler sales fell 12%, even as its overall sales increased 5% on the back of stronger exports.
Monsoon impact on rural demand
India's weakest monsoon in over a decade dented rural spending in September and weighed on tractor sales, data showed on Thursday.
Monsoon deficit affects crops
The June-September monsoon, which delivers nearly 70% of India's annual rainfall, was 12.6% below normal this year, fuelling concerns over crop yields, rural demand and food inflation in Asia's No.3 economy.
Rural income pressures
Lower farm incomes and, as a result, rising rural indebtedness hurt purchasing power and demand for consumer goods and services.
Q2 results outlook
Despite September's mixed showing, robust quarterly volumes should support Q2FY27 revenues but margins face greater pressure as cheaper raw-material inventories run out.
Commodity cost risks
Steel, aluminium, copper, rubber, precious metals, energy and freight are key cost heads for vehicle manufacturers and component suppliers.
Festive demand timing
The festival calendar is more spread out this year, with Navratri and Dussehra in October and Dhanteras and Diwali in November, supporting sustained demand through October and November.
Retail conversion critical
The key monitorable is retail conversion relative to dealer inventory, with passenger-vehicle dispatches estimated at 4.60, 4.65 lakh units in September.
Q2 margin pressures
OEMs with premium product mix, high SUV exposure, robust pricing power, scale benefits and active cost-reduction programmes should better protect margins.
What matters most
India's auto sales rose 21.4% year-on-year in September but weak monsoons reduced tractor sales by 21% and rural demand, raising concerns for Q2 stock performance.
