Automobile sector monthly update for June 2013: Angel
Automobile: Expect a marginal recovery in volumes in 2HFY2014 led by continuous softening of interest rates, expectation of a normal monsoon, festival season demand and also on account of the base effect, say Angel Broking.
July 04, 2013 / 14:31 IST
Angel Broking: Automobile sector monthly update - June 2013
"Domestic automotive sales remained weak in June 2013, in-line with expectations, impacted by slowdown in economic activity and negative consumer sentiments. While the medium and heavy commercial vehicle (MHCV), passenger car (PC) and motorcycle segments continued to remain the most impacted, growth in the utility vehicle (UV) and light commercial vehicle (LCV) segments too has tapered off since the beginning of FY2014. The tractor segment however witnessed a strong growth on expectations of a normal monsoon. Going ahead, we expect the demand environment for the sector to remain sluggish in 2QFY2014 as well; however, we expect a marginal recovery in volumes in 2HFY2014 led by continuous softening of interest rates, expectation of a normal monsoon, festival season demand and also on account of the base effect.""Tata Motors (TTMT) continued with its downward sales momentum in the domestic markets as its commercial vehicle (CV) and passenger vehicle (PV) businesses reported a decline of 13 percent and 31.2 percent yoy respectively. Consequently, total volumes registered a decline of 18.1 percent yoy to 52,708 units. While MHCV and PV sales continued to slide sharply, LCV sales too witnessed a decline during the month.""Ashok Leyland (AL) reported broadly in-line volumes with total sales witnessing a decline of 32 percent yoy (4.1 percent mom) to 6,967 units, following weak industrial activity. CV sales (ex. Dost) declined by 37.3 percent yoy (4.4 percent mom); Dost sales reported a decline of 17.3 percent yoy to 2,253 units.""Maruti Suzuki (MSIL) Maruti Suzuki posted a 12.6 percent yoy (flat mom) decline in total sales to 84,455 units, which was in-line with our expectations. The weak performance could be attributed to continued slowdown in domestic demand and macroeconomic uncertainty in key export markets. While domestic volumes declined 7.8 percent yoy (1.1 percent mom), export volumes posted a significant decline of 43 percent yoy.""Mahindra & Mahindra (MM) reported a mixed performance. Its automotive segment witnessed a sharp decline of 7.8 percent yoy (12.4 percent mom) due to a slowdown in the PV segment; however the tractor segment continued with the strong momentum and reported a better-than-expected growth of 16.8 percent yoy (17.5 percent mom). Total sales posted a modest growth of 1.2 percent yoy (down 1.9 percent mom) to 65,841 units. The automotive segment recorded lower-than-expected sales as volumes were impacted due to a 12.9 percent yoy (22.5 percent mom) decline in the PV segment on account of slowdown in demand for utility vehicle (UV)s following an increase in excise duty and also due to increasing competition in the segment.""Two-wheelers and three-wheelers: Two-wheeler manufacturers in our coverage universe posted an extremely poor performance as demand continued to remain weak and with competition remaining at elevated levels. Bajaj Auto (BJAUT) registered lower-than-expected volumes (sales down 14.3 percent yoy and 12.8 percent mom) led by weakness in the domestic motorcycle segment and also on account of the production loss due to strike at its Chakan plant. Hero MotoCorp (HMCL) posted a 6 percent yoy (10 percent mom) decline in volumes, which was lower-than-expected, impacted by slowdown in demand and also on account of higher dispatches that had happened in the month of April and May. TVS Motor Company (TVSL) reported in-line volumes with total volumes remaining flat mom (down 2.7 percent yoy) led by poor performance by the two-wheeler segment. Three-wheeler sales on the other hand continued with the strong momentum and posted a growth of 108.2 percent yoy (16.7 percent mom) driven by exports," says Angel Broking research report.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. 
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