Currency depreciation to cause auto industry: R K Global

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Currency depreciation to cause auto industry: R K Global

R K Global has come come out with its report on monthly auto sales - December 2011. According to the research firm on the demand side, 2-wheeler demand remain structured, while some upside movement in LCV and M&HCV can be seen, while, in near term on domestic economy is expected to remain sluggish amid the challenges.

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RELATED NEWS Accumulate Shriram Transport; tgt of Rs 577: SKP Securities Buy Swaraj Engines; target of Rs 458: Firstcall Research Hold Infosys; target of Rs 2781: KRChoksey TVS Motor BSE | NSE 29/05/12 Are Mutual Funds betting on TVS Motor? Other Stocks in this news Bajaj Auto | Hero Motocorp | Maruti Suzuki India | Tata Motors | Mahindra and Mahindra | Ashok Leyland |

R K Global has come come out with its report on monthly auto sales - December 2011. According to the research firm on the demand side, 2-wheeler demand remain structured, while some upside movement in LCV and M&HCV can be seen, while, in near term on domestic economy is expected to remain sluggish amid the challenges.

"Sales in the month of December showed some revival with pick up in passenger car sales led by Maruti Suzuki and uplift of sentiments with the decrease in food, expectation on easing interest rates by RBI and heavy discounts offered by OEMs and dealers to maintain sales momentum, help to lower inventory in the system. LCVs continued to show strength while 2-wheeler segment lost the shine this month. Total domestic sales in December grew by 3% on a Y-o-Y basis & -5% on M-o-M basis. Total sales in April-December 2011 were up by 13.6% from the corresponding period last year. Among the majors, Tata Motors and Hero MotoCorp reported better-than-expected numbers for the month. December volumes showed a sign of revival from the previous month. The industry clocked more than 1.6 million vehicles across category in Dec'11.

Industry growth is expected to be driven primarily by Commercial vehicles. Domestic CV segment sales clocked 17.4% Y-o-Y to ~85 thousand units in December, 2011, from 70 thousand units same month last year, while the PV segment has witnessed a increase of 12.8% Y-o-Y (-4.1% M-o-M) basis. The 2-Wheeler segment grew 11% Y-o-Y (decline -5.6% M-o-M) during the month of Dec'11.

The outlook towards volume growth in the sector is commingling, on an index performance basis; the BSE Auto index underperformed yet another month on M-o-M return of -3.4% in Dec'11. On the demand side, 2-wheeler demand remain structured, while some upside movement in LCV and M&HCV can be seen, while, in near term on domestic economy is expected to remain sluggish amid the challenges. Though it is to be noted that demand is structural, food inflation has fallen down to -3% Y-o-Y, expected easing of higher interest rates and inflated commodity price, while the concern is depreciating domestic currency, which could cause serious concerns for the whole industry as profitability and volume growth could see erosion.

Two-wheeler Segment
The 2-wheeler reported sapless sales for the month of December 2011 by 11% on Y-o-Y basis at 1.4 million units. The two wheeler industry reported a feeble sales number after three consecutive astral performances till Nov'11. On M-o-M basis the growth declined by 5.6% during the month of Dec'11. Going forward, the 2W industry is expected to report a volume CAGR of 9-11%in FY12. The entry of new players in the industry, multitude of new launches, growing distribution reach, has helped the industry to grow and become prime movers for Auto Sector to growth over the medium term. However, rising commodity prices, hardening interest rates and increasing fuel costs may lead to some moderation in industry growth over the short term.

TVS Motors  sales continued to move in line with the industry trend on stronger two-wheeler sales in comparison to the overall industry. Overall sales were clocked at 170428 units, a decline of 0.8%Y-o-Y and 2.9% M-o-M. Motorcycle sales volumes had a worst performance to stand at ~56662 units, a decline of 7% Y-o-Y and 9.5% M-o-M. Scooter sales witnessed a growth of 7.2% Y-o-Y and 1.2% M-o-M to 44 thousand units. The export segment continued to do well with 42% Y-o-Y growth clocking 22481 units. Cumulative figures during the period April to December, 2011, grew by 10.5% to ~16 lakh units as against 15 lakh units sold in the same period last year.

Bajaj Auto  posted slothful sales numbers declining 10% Y-o-Y with exports providing strong support (up 25.1% Y-o-Y). Total volumes for the month were at 3.0 lakh units reflecting a fall of 18.4% M-o-M. In the two-wheeler segment, Pulsar and Discover brands (accounting for ~68% of total sales to 1.7 lakh units) continued to be the volume driver. The motorcycle sales volume declined 21% M-o-M to 2.6 lakh units. The three-wheeler segment for Bajaj Auto continued its growth of 26.7% Y-o-Y (decline -1.2% M-o-M) to 41991 units.

Hero MotoCorp  (HMC), the market leader in the two-wheeler segment, keeps up the momentum of consistent five lakh-plus unit sales every month. The company registered volumes of 5.4 lakhs unit a growth of 7.1% Y-o-Y (0.6% M-o-M). Cumulative Apr-Dec'11 sales volume grew 9.6% Y-o-Y to 46.9 lakhs units.

Four-wheeler Segment
Commercial vehicle (CV) segment registered a stirring performance with a growth of ~17.4%Y-o-Y to ~85K units sales volume in December across industry, While the domestic passenger car segment grows at 12.7% on Y-o-Y (decline 4.1% M-o-M). However, this segment would continue to face challenges on the interest rate front and could receive a boost by the end of FY12. The long-term outlook for the domestic CV industry remains strong. While the PV cars segment has exceeded sales in the mini-segment; the growth in this segment has been led by new launches, lower prices versions of the vehicles in the Mid-size segment. The entry of new players in the industry and the significant capacity additions expected are however likely to keep the competitive pressures high.

Maruti Suzuki India (MSIL) gets relived from its consecutive drop in monthly sales; the company's total sales increased 8.1% M-o-M. Commercial Vehicles were the main driver for the company; it increased 55% M-o-M (10.1% Y-o-Y) to 73078 units. The PV (-5.3% M-o-M) segment was the worst performer in Dec'11. A1 and A3 segment declined 11.7% and 6.8% M-o-M to 9181 and 20653 units respectively. While the SX4 model lost the growth momentum, the sales volume stood 843 units (down 42% M-o-M).

Tata Motors : Domestic sales of the company have increased by 24% Y-o-Y (5.8% M-o-M) to 76663 units; despite the good performance in domestic segment, the company's exports in the period under review declined 3.3% Y-o-Y( increase 29.1% M-o-M) at 5615 units. Passenger vehicles were the main contributor which increased 47.3% Y-o-Y (2.2% M-o-M) to 29417 units, while makeover of Nano boosts sales by 16.4% M-o-M to 6401 units. The Indica range reported sales volume of 9307 units, up 57.1% Y-o-Y (decline 14.8% M-o-M), while the Indigo segment recorded sales volume of 6888 units, a increase of 31.6% Y-o-Y and 10.8% M-o-M. Sales of Sumo, Safari, Aria and Venture segment grew 90% Y-o-Y (25.2% M-o-M) to 5255 units. Commercial vehicle rose 13.8% Y-o-Y, where LCV segment was the main contributor which increased 20.1% Y-o-Y (2.8% M-o-M) to 29500 units. M&HCV sales stand at 18247 units up both by 5.1% Y-o-Y and 13.6% M-o-M.

Mahindra and Mahindra (M&M) reported strong 17.4% Y-o-Y growth in total volume to 59150 units, The automotive sale stood 42761 units during Dec'11, a increase of 25.5% Y-o-Y, while in FES segment total sales volume accounted to 16389 units, a increase of -0.4% Y-o-Y (-6.5% M-o-M). In the tractor space, domestic sales rose 1.2% Y-o-Y (decline 5.3% M-o-M), while export showed a striking growth of 78.6% Y-o-Y (11.9% M-o-M). In automotive segment, LCV & M&HCV sales volume grew by 23.9% Y-o-Y, where as four- wheeler pick up segment continued a strong growth of 35.4% Y-o-Y. Automotive export showed astral performance of 78.6% Y-o-Y (11.9% M-o-M), to 2870 units during December 2011.

Ashok Leyland  (ALL), the Hinduja group company sales volume witnessed astral performance of 20.1% Y-o-Y (15.4% M-o-M), to 9088 units in Dec'11. Domestic sales scaled up by 25.4% Y-o-Y (24.2% M-o-M) to 8042 units. While exports segment which were on the higher side for many months now, declined 9.6% Y-o-Y and 25.4% M-o-M to 1046 units. The company's Apr-Dec'11 sales volume showed muted performance grew 2.6% Y-o-Y to 66123 units. While domestic sales rose 1.6% Y-o-Y to 57520 units, exports surged 10.6% to 8634 units. However, this year there has been a sharp slowdown, especially as the RBI has hiked interest rates several times. While with the decline in inflation rate, interested rate is expected to come down in next RBI meet.

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To read the full report click on the attachment