The auto industry is reeling under the stress of semiconductor shortages, rise in transportation costs and a surge in fuel prices. Wholesale dispatches of two-wheeler companies fell over the past 2-3 months. This dovetailed with weak retail sales for Bajaj Auto, Royal Enfield and Hero MotoCorp.
Retail sales of the four two-wheeler makers rose in June and July as the country’s economy unlocked after the devastating effect of the second wave of the Covid-19 pandemic. But retail sales started to taper off from August, indicating that the initial jump was from pent-up demand. In the lead up to the October-November festive period, two-wheeler makers pushed more inventory in anticipation of festive purchases. There was decent demand for bikes and scooters, but overall purchases were below expectations. Retail sales in November 2021 were lower than both November 2020 and the pre-Covid November 2019 period.
This indicates a severe demand problem in the automotive sector, and not just supply chain challenges. High fuel prices have also played spoilsport. It will be interesting to see whether Hero MotoCorp, with its stock touching new 52-week lows consistently, can recover from this blow.
