Automobile companies will announce their sales data for the month of February on March 1. Analysts expect the volumes to continue to be mixed due to weak retail demand in wedding season.
Rising ownership cost, deferred purchases during elections and selective financing by NBFCs are also constraining volume performances across the automotive segments in the near term, Emkay said.
Overall, sales data has been either mixed or weak since September 2018 when the IL&FS-led liquidity crisis emerged along with rising ownership cost and tepid festival season.
"Our channel checks suggest that the volume performance in February 2019 is expected to be a mixed bag in the domestic market with growth in passenger vehicles (PVs)/tractors and a muted show in other segments," Emkay said.
Motilal Oswal said after interaction with leading PV/2-wheeler (2W)/commercial vehicle (CV) channel partners indicated continued weak demand momentum in key markets in February 2019. "Inventories in PVs and CVs remained stable at around 15-20 days, while 2W inventory was still high at around 40-45 days."
According to brokerages, passenger vehicle sales despite new products launch may remain mixed or marginally higher compared to year-ago.
"PV demand trend remains mixed across major markets with inquiries to sales conversion continuing to remain weak for existing models. However, new product launch such as XUV3OO, Marazzo, Ertiga, and WagonR helped bring footfalls to the dealerships," Motilal Oswal said.
The average inventory level for MSIL stood at around 15-20 days, while for M&M, it was higher at around 25-30 days.
Emkay expects PV volumes to be positive in the domestic market with growth for M&M (+10 percent YoY), Tata Motors (+4 percent) and Maruti Suzuki (+1 percent).
"Dispatches have been marginally affected at Maruti Suzuki owing to temporary quality issues amid harder weather conditions (hailstorms in Delhi caused dents on vehicles in the company stockyards). Discounts increased MoM across most models," the research house said.
In addition, Emkay said medium & heavy commercial vehicle (MHCV) volumes are likely to be negative due to high base, surplus capacity and purchase deferrals during elections.
According to the brokerage, the domestic MHCV volumes are expected to decrease for M&M (-9 percent), Eicher Motors (-7 percent), Tata Motors (-4 percent) and Ashok Leyland (-3 percent).
Motilal Oswal said overall commercial vehicle demand was mixed with key markets of Maharashtra, Delhi and Gujarat indicating a decline in retail as demand from all major end user segments, except white goods remained weak. Hence, average discount per unit was high.
In the tractor segment, volumes are expected to be positive with growth of Escorts (6 percent) and M&M (1 percent), Emkay said.
The retail demand in two-wheeler segment may continue to be weak with Hero MotoCorp showing a fall in sales, experts suggest.
Post weak retail in Q3FY19 and January 2019, key channel partners still suggest weak retail across key markets (average decline of 8-10 percent) except the South (flat-to-positive), Motilal Oswal said.
Emkay said Hero MotoCorp sales may decline 6 percent and Eicher Motors (Royal Enfield) down 4 percent, but Bajaj Auto sales may increase 16 percent and TVS Motor Company 1 percent.
The research house expects PV and 2W segments to see a gradual improvement in volumes in the coming months, driven by new products, continuing uptrend in rural sales, volume pick-up in the state of Kerala, and the pre-buying impact before the BS6 transition.
In common, their top stock picks among auto stocks are Maruti Suzuki, Motherson Sumi and Exide Industries.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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