Auto Sales Likely to Improve in Second Half of 2022: Sharekhan

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Auto Sales Likely to Improve in Second Half of 2022: Sharekhan
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- Domestic brokerage firm Sharekhan, in a report, said that auto companies might have a better June 2021 after quasi washouts in April and May 2021. The firm is basing this on reducing restrictions, falling COVID-19 cases and increasing vaccinations.

“The easing of restrictions has helped the recovery of retail sales up to 65-70% of the normal levels. Our interactions with original equipment manufacturer (OEMs) and dealers suggest strong demand from rural areas, though there has been a sales loss on account of the marriage season forgone in May and June of 2021,” said Sharekhan.

Share prices of almost all auto companies like Tata Motors (NS: TAMO ). Maruti Suzuki (NS: MRTI ), Ashok Leyland (NS: ASOK ) and M&M (NS: MAHM ) are trading sideways or below Feb-March 2021 levels.

However, the tide might be turning. Sharekhanadded in its report, “We expect automobile sales to normalize from Q2 FY22 onwards. We expect most OEMs to reach 60-80% of normal dispatches in June. As the retail markets might take a few weeks more to get fully operational, we expect dealers’ inventory to increase in June 2021.”

It helps that export markets for a large number of these companies are stronger than in India. “The export regions such as Africa, Latin America, ASEAN, South Asia and Middle East regions remain largely less impacted by the second wave of COVID-19. Most of these markets have reached pre-COVID levels,” said Sharekhan.

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