May auto sales a mixed bag from industry: Way2Wealth

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May auto sales a mixed bag from industry: Way2Wealth

Way2Wealth has come out with its report on automobile space.

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Way2Wealth has come out with its report on automobile space.

Q1FY12 - Crucial for the Industry: As we have been mentioning in our earlier Monthly Investor Communication, we Reiterate that monthly sale numbers are important as it gives a sense of consumer demand. Q1FY12, is a crucial quarter for Automobile Sales as Seasonally speaking it is the worst quarter for the Industry. Additonally, this quarter comes on the back of a High Base as we have seen Two years of phenomenal growth of >25% for the Industry, whereas its 8 year CAGR has been at 12%. Our recent interaction with OEM's have given us a sense that the customer query to sales conversions have fallen considerably, resulting into reduced footfalls. High cost of ownership on account of high interest, high fuel prices and high purchase cost has started pinching the Demand Variable. But the silver lining is that finance company's exposure to rural auto sector has been increasing and has resulted into good volumes. This accounts for a hedge for companies, which have rural presence as against companies, which don't as it allows opportunity for greater penetration. Inventory levels at the dealers end has no doubts increased on account of which discounts were given in the recent past to lure customers. But looking into the largest car player, Maruti, the discounts for the month of April have reduced as compared to that offered in Q4FY11. While Q1FY12 would be a lackluster quarter on a relative basis, we would continue to closely watch the sale numbers. Unless we see a huge decline on a seasonally adjusted basis, we would not change our view from 'Cautious' to 'Negative' for the Sector.

Analysis done on the basis of Trend: We have studied the numbers from a Q1 perspective, where-in we have compared the May numbers to the monthly average runrate of the players in Q1FY11. This gives us a better idea as to how the demand has panned out in the light of higher ownership cost. We have not taken FY11 average runrate into account as it was a superlative year for the industry and as we are of the view that two months of sales (April & May) in a seasonally weak quarter cannot determine the trend for the whole year, being FY12.

May, 2011 Performance - Two Wheelers outpace Four Wheelers - 2W & 3W outpace CV's & PC's: It is clearly visible that the month of May has also seen Two wheeler players outperforming the Four Wheeler Players mainly on account of their presence in the rural areas and less impact on EMI and cost of ownership from higher interest cost and fuel expense respectively. Among the two wheeler players, Hero Honda and TVS Motors have come out with excellent numbers. TVS Motor has seen greater traction in its Scooter and Moped Segment. Hero Honda has already crossed 1mn unit mark in the 1st 2 months of FY12. BAL Management had indicated that Retail sales for the company would be higher than that of its Wholesale Billings. May numbers have come in decent with Exports (after adjusting for transit vehicles) being at its highest ever- levels and its 3W's near its October HIGH of last year. Among 4 Wheeler pack Maruti numbers though above its Q1FY11 average runrate , its compact car segment, which , forms bulk of the revenues has seen muted growth. Exports have also disappointed, but the key highlight has been the performance of its SX4 and Dzire models. M&M has seen a steady runrate on the back of its UV and Tractor performance, while Tata Motors PV segment disappoints and CV segment sees muted growth.