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Last Updated : Sep 29, 2018 08:42 AM IST | Source:

Motilal Oswal expects moderate two-wheeler, passenger car sales, robust CV growth

Motilal Oswal expects Bajaj Auto, Hero MotoCorp and TVS Motor wholesales to grow 5.5 percent, 1.3 percent and 2.3 percent, respectively, in September

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Caution was the word as auto stocks were under pressure on September 28. Select auto companies even saw fresh short additions on September 27, the expiry day for this month's contracts.

The Nifty Auto index was down 2 percent on September 28 and crashed nearly 13 percent in the month following weak market conditions.

Auto sales numbers for September are scheduled to be announced next week. Investors are cautious ahead of sales numbers as August data was mixed due to Kerala flood impact and delayed festive season.

Hero MotoCorp, TVS Motor, Bajaj Auto, Maruti Suzuki, Eicher Motors, M&M and Ashok Leyland fell 1-5.7 percent while Tata Motors was down half a percent on September 28.

Motilal Oswal expects moderate retail sales in the passenger vehicle and two-wheeler segments while commercial vehicle (CV) sales are expected to be robust.

"Rain deficiency in key markets like Bihar (-21 percent), Haryana (-22 percent), UP (-9 percent) and Gujarat (-27 percent) is impacting rural incomes, and in turn, retails. The need for upfront payment of insurance cost, the inauspicious ‘Shradh’ period and rising fuel costs, too, impacted buying decisions in rural areas," the research house said, adding the demand momentum in 2-wheeler is mixed.

The retail sales growth in two-wheelers has moderated to 6-8 percent from 8-10 percent earlier, it feels. The research house expects Bajaj Auto, Hero MotoCorp and TVS Motor wholesales to grow 5.5 percent, 1.3 percent and 2.3 percent, respectively, in September.

In case of passenger vehicle segment, Motilal Oswal said Maruti Suzuki may grow at around 7 percent (versus 8-9 percent earlier) in key rural markets and around 4-6 percent in urban markets (versus 6-7 percent earlier). Mahindra & Mahindra's retail growth, too, may be at similar levels, it added.

On the CV front, the research house said demand in key markets is healthy, but the shift to lower-tonnage vehicles has accelerated owing to the implementation of new axle norms.


It further said while healthy freight availability continues driving new CV demand from both large and small fleet operators, higher diesel prices and the commensurate lag in freight rate increase are impacting buying decisions.

Ashok Leyland has increased the price by 1-1.5 percent across segments.

Motilal Oswal expects CV wholesales for Ashok Leyland and Tata Motors (TTMT) to grow by 22 percent YoY and 21 percent YoY, respectively, in September.

The brokerage house prefers passenger vehicles over two-wheelers and CVs due to their stronger volume growth and a stable competitive environment.
First Published on Sep 29, 2018 08:42 am
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