Auto Stocks Surge on Scrappage Policy; Jumped To 10.5 Percent on Sales Growth in January

Shares of auto companies rose upto 10.5 percent after Finance Minister Nirmala Sithraman announced scrappage policy. Reacting to the news, shares Ashok Leyland rose over 10.48 percent, Tata Motors gained 6.53 percent, Mahindra & Mahindra 6.06 percent, TVS Motor Company 3.09 percent, Bajaj Auto 2.67 percent and Maruti Suzuki India 2.66 percent. The BSE Auto index was up 3.20 percent at 22,836.25.

Reflecting a seemingly sustainable market recovery amid concerns of oversupply of certain parts, auto majors Maruti Suzuki, Hyundai Motor, M&M, Tata Motors, Honda and MG Motor on Monday reported growth in their domestic passenger vehicle sales in January. The country's largest carmaker Maruti Suzuki India (MSI) reported a 2.6 percent rise in domestic sales to 1,48,307 units last month as against 1,44,499 units in January 2020.

Homegrown auto major Tata Motors said its passenger vehicle sales in the domestic market in January stood at 26,978 units as against 13,894 units in the same month previous year, up 94 percent. Utility vehicles major Mahindra & Mahindra's domestic passenger vehicle sales were up 4 percent to 20,634 units last month as compared to 19,797 units in January 2020.

Presenting the Budget for 2021-22 in Parliament, FM Sitharaman said that under voluntary vehicle scrapping policy, personal vehicles would undergo fitness test after 20 years while commercial vehicles would require it after completion of 15 years.

Tata Motors CEO and MD Guenter Butschek said voluntary vehicle scrapping policy to phase out old and unfit vehicles, augmenting public transport system in urban areas, continuing focus on adoption of cleaner fuels, and enhancing outlays for developing road infrastructure are positive steps for the auto industry.

Toyota Kirloskar Motor (TKM) Vice Chairman Vikram Kirloskar said the long-awaited scrapping policy could contribute to lower fuel consumption, lessen pollution while also generating additional demand for cleaner new vehicles. “Automobile sector will have much to cheer from the union government's decision to introduce a voluntary vehicle scrapping policy,” said Vishal Wagh, Research Head, Bonanza Portfolio on Budget 2021.