Nifty Auto plunges 7.7% in just 5 sessions, TVS Motor, Bajaj Auto fall up to 11.3%

Indian auto stocks were adversely impacted in the recent sell-off triggered by escalating tensions between Iran and Israel. Moreover, automobile sales experienced a notable decline in September, and the weak outlook projected by major global car manufacturers is also exerting pressure on the auto stocks.

Against this backdrop, the Nifty Auto index extended its losing streak for the fifth consecutive trading session on Monday, declining by 1.50% to 25,544 points. Since reaching its peak of 27,696 points on September 27, the index has fallen by 7.7%. 

TVS has seen the most significant decline during this period falling by 11.3%, followed closely by Bajaj Auto and Eicher Motors, both down by 10%. Hero MotoCorp and Samvardhana Motherson International also experienced notable drops of 8% and 10%, respectively.

Maruti Suzuki India declined by 9%, while Ashok Leyland and MRF both recorded decreases of 10%. Tata Motors dropped by 8.5%, Bharat Forge by 8%, Mahindra & Mahindra by 7%, and Bosch saw a decline of 5% in the last five trading sessions.

Automobile sales decline 9.26% YoY in Sep

The latest data released by the Federation of Automobile Dealers Association (FADA) indicated persistent challenges in the automobile sector, with sales continuing to decline amid waning consumer demand. Even the festive occasions of Ganesh Chaturthi and Onam failed to stimulate demand. 

The 2-wheeler retail sales declined by 10% MoM and 8.5% YoY due to low consumer sentiment, poor inquiries, and reduced walk-ins. Seasonal factors like the Shraddh period, Pitrapaksha, and heavy rains further impacted demand, resulting in delayed purchases and a subdued market environment.

In the PV category, retail sales plummeted by 10.8% MoM and 18.81% YoY, the FADA data showed. 

“Seasonal factors such as Shraddh and Pitrapaksha, coupled with heavy rainfall and a sluggish economy, have exacerbated the situation, leaving dealers with historically high inventory levels of 80-85 days—equivalent to 7.9 lakh vehicles worth ₹79,000 crore,” said FADA President, Mr C S Vigneshwar.

“Given the critical festive season around the corner, FADA urges OEMs to take immediate corrective measures to avoid a financial setback. FADA also calls on the Reserve Bank of India to issue an advisory to banks, mandating stricter channel funding policies based only on dealer consent and on actual collateral, to prevent dealers from facing additional financial pressure due to unsold stock. This is the final opportunity for PV OEMs to recalibrate and support market recovery before it’s too late,” Vigneshwar added.

Overall, September saw a decline in overall retail sales, dropping by 9.26% YoY.

The passenger vehicle (PV) industry has been facing challenges due to low consumer demand and rising inventory levels. In an effort to clear their stock, manufacturers have increased discounts, but these have yet to translate into a significant improvement in sales.

This surge in discounts has also raised concerns among investors, as it is likely to have a direct impact on the company’s profit margins. After witnessing robust double-digit growth in FY22, FY23, and FY24, primarily fueled by the post-COVID demand recovery, passenger vehicle (PV) sales have significantly slowed down, particularly in the last three months.

Analysts had previously projected that PV sales in FY25 would experience a growth rate of around 5%, in contrast to the more than 8% improvement recorded in FY24.

The decline in passenger vehicle (PV) sales is not limited to India; major global automotive giants are also experiencing significant challenges. All three major German automakers—Volkswagen, Mercedes-Benz Group AG, and BMW AG—have adjusted their sales forecasts for 2024 downward.

Volkswagen is reportedly considering plant closures in Germany, marking a potential first in the company’s history.

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