The early festive season this year, which started on 26 September versus 7 October last year, brightens the outlook for passenger vehicle (PV) segment. However, this may not bring much cheer to the two-wheeler (2W) segment given the weak rural demand. Against this backdrop, investors would closely track the September wholesale volume numbers of automakers, which would be announced in the next one-two days.
Analysts at Nomura Financial Advisory and Securities (India) estimate the PV industry to clock best ever wholesales at 350,000 units in September as they expect strong sales helped by channel pre-festive filling. What also helps is easing supply chain issues.
Nomura expects Maruti Suzuki India Ltd’s domestic PV volumes in September to rise by 126% year-on-year. Of course, this growth is partly helped by low base. Sequentially, Maruti’s volumes are foreseen to be up by 8% and Mahindra & Mahindra Ltd’s (M&M) domestic auto volumes are likely to increase by 10%.
For 2Ws, volumes are expected to be up by 1-10% sequentially across Bajaj Auto Ltd, TVS Motor Co. Ltd and Hero MotoCorp Ltd, according to Jefferies India. This comes on the back of channel filling for the festive season. But growth on a y-o-y basis is likely to be muted.
Analysts at Jefferies estimate TVS’ 2W volumes to grow by 4% while Bajaj Auto’s volumes are likely to remain flat y-o-y. Hero MotoCorp Ltd, which mainly operates in the entry-level segment, is expected to see a volume decline of 4% y-o-y.
The muted rural demand is also likely to weigh on tractor volumes. Motilal Oswal Financial Services expects M&M’s tractor volumes to remain flat y-o-y and Escorts Ltd’s volumes to decline by 4%.
With respect to commercial vehicles (CVs), Motilal Oswal notes that demand has been improving post monsoons, but automakers are still offering discounts to gain market share. They added, “Inventory in the channel is at its optimal level of 20-30 days.” The broking firm expects Ashok Leyland Ltd and Tata Motors Ltd’s CV volumes to grow by 61.5% and 8% y-o-y, respectively. Sequentially, volumes are likely to grow by 9-14%.
Barring 2Ws, all other segments have recovered to the pre-covid levels. One data set which confirms this is the vehicle registration numbers. “Registrations in September month-to-date, compared to 2019, are up a strong 22-37% for PVs, tractors and trucks, but are down 18% for 2Ws,” said analysts at Jefferies in a report on 29 September.
Meanwhile, even as demand is scattered across segments, automakers would benefit from the drop in commodity prices. This would reflect in the financials with a lag. As such, significant margin improvement can be expected in H2FY23.
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