Auto sales review: Cars, 2-wheelers, MHCV under pressure

For July 2012, automobile sales witnessed a mixed trend as a slowdown in economic activity and negative consumer sentiments fuelled by higher inflation and increasing cost of ownership impacted growth. While light commercial vehicles (LCV) and utility vehicle (UV) sales continue to defy the general slowdown in the automotive sector, passenger cars (PC), medium and heavy commercial vehicles (MHCV), tractors and two-wheelers are reeling under the pressure of demand slowdown. Among auto majors, Mahindra and Mahindra (MM, automotive division) and Tata Motors (TTMT) reported strong volume growth; Maruti Suzuki (MSIL), Hero MotoCorp (HMCL), Bajaj Auto (BJAUT) and TVS Motor (TVSL) registered sluggish performance. Going ahead, we expect LCV and UV sales to sustain their growth momentum; however, sales of two-wheelers, PCs (petrol variants), MHCVs and tractors are expected to remain under pressure.

TTMT registered a better-than-expected sales growth of 15.3% yoy (14.2% mom) driven by a strong growth in passenger vehicle (PV) sales which grew by 50% yoy (50% mom). The PV segment witnessed a strong growth across the product portfolio. The CV segment recorded a modest growth of 1.6% yoy (flat mom) as MHCV volumes declined 20.6% yoy (1.1 mom) due to a slowdown in industrial activity and lower freight availability. The sale of LCVs on the other hand continued with the strong momentum registering a growth of 15% yoy (1% mom).

Ashok Leyland (AL) reported mixed numbers as commercial vehicle (CV) sales ex- Dost registered a decline of 10.9% yoy (7.1% mom). However, Dost’s sales came in better-than-expected at 2,803 units (up 2.9% mom). As a result, total volumes grew by a strong 24.9% yoy (down by 4.5% mom) to 9,785 units.

MSIL recorded slightly lower-than-expected volumes with total volumes declining by 14.9% mom on account of 30.3% and 16.9% mom volume decline in the compact and super compact segments. The decline in volume was due to the shutdown of the Manesar plant since July 18, 2012 which accounts for ~35% of the overall manufacturing capacity. The Manesar shutdown negatively impacted the sale of popular models - Swift and Dzire which continue to witness strong demand. On a y-o-y basis volumes jumped 9.2% due to the low base of corresponding period of last year.

MM continues to defy the slowdown being witnessed in the automotive segment with it posting a total volume growth of 12.9% yoy (down 2.3% mom). The automotive segment remained the primary volume driver clocking better-thanexpected growth of 18.7% yoy (13.9% mom). The automotive segment growth was led by 32.3% yoy (7.2% mom) growth in the UV segment which was driven by the XUV5OO. Exports too registered an impressive growth of 84.4% yoy (79.7% mom). However, tractor sales remained subdued with volumes declining by 1% yoy (30.5% mom) due to weak domestic demand.

Two-wheelers and three-wheelers: BJAUT reported lower-than-expected volumes, posting a 5.4% yoy decline (flat mom), led by weakness in export sales, which fell by 12.8% yoy (up 8.1% mom on account of partial recovery in Sri Lanka and Egypt). Hero MotoCorp (HMCL) registered 1.4% yoy (9.3% mom) decline in total volumes due to a slowdown in demand and build-up in inventory at the dealers’ ends. TVSL posted poor numbers yet again with total sales declining by 15.1% yoy (4.4% mom), led by weak performance across the two-wheeler product portfolio.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.