Auto sales in the month of November are expected to be a mixed bag with likely fall in commercial vehicle, two-wheeler and tractor segments, but the passenger vehicle part could see stable numbers.
"November 2019 wholesales are likely to be a mixed bag with marginal growth in passenger vehicles (PVs) while other segments continue to decline," said Japanese brokerage firm Nomura.
Industry interactions lead the brokerage to believe that PV retails have been better, benefitting from extended deliveries post the festive season which ended in October.
Prabhudas Lilladher also said its interaction with leading PV channel partners indicated continued growth momentum even after the festive season in key regions despite moderating discounts. This is led by new model launches, aggressive financing and positive sentiments due to monsoon, it added.
Higher discounts across diesel variants and new product launches such as S-presso, Seltos, Venue, Hector and XL6 continued to bring in the footfalls and conversions, it said.
Nomura expects Maruti Suzuki to report flat overall volumes due to better retails and leaner inventory than competitors. "We expect company's domestic volumes to decline around 1 percent YoY," it said, adding M&M's utility vehicle volumes are likely to decline around 4 percent YoY.
According to Prabhudas Lilladher, Maruti sales are expected to decline 4 percent YoY/ MoM while M&M automotive sales are expected to decline 6 percent YoY (down 18.1 percent MoM).
Overall, Nomura expects the PV industry sales to be up 1 percent YoY in November. "There could be upside risk to our expectation of industry volumes declining 15 percent YoY in FY20 if healthy retails continue in December (note that December 2018 had a high base with retails up around 10 percent YoY for industry)," it said.
The two-wheeler segment is expected to show single-digit decline in November sales as they could not sustain the recovery seen in October.
"We expect industry volumes to decline by around 7 percent YoY in November. Given the upcoming BS-6, we do not expect companies to increase inventory materially. Moreover, companies have started launching BS-6 models with prices around 13-15 percent higher than existing models. This could be a key headwind for demand into FY21 and poses downside risk to our expectation of around 7 percent decline in FY20 and flat growth in FY21," said Nomura.
Prabhudas Lilladher said its interaction with two-wheeler channel partners indicated significant decline in demand post festive. "Retails in urban market declined by 10-15 percent YoY (on a high base) while it remained flat to negative in rural markets," it added.
Extended monsoons adversely impacting the crops and deferred purchases in the hope of hefty discounting before BS6 implementation are triggering postponement in buying decisions.
Hero MotoCorp and TVS Motor are expected show double decline in November sales while Bajaj Auto could show around 7 percent decline in sales YoY.
But, brokerages are divided on Royal Enfield sales as Prabhudas Lilladher expects wholesales to grow by 5 percent YoY, but Nomura sees 1 percent decline YoY.
Commercial Vehicle Sales
Commercial vehicle companies are likely to see steep fall in their sales for November due to weak demand and inventory clearance, but brokerage houses expect stronger recovery in the second half of the next financial year.
"CV demand continued to remain under pressure led by slow pace of industrial activities, extended rain delaying infrastructure projects and higher operating costs," said Prabhudas Lilladher, adding Ashok Leyland’s inventory remained stable at around 20 days while Tata Motors inventory further declined to around 25 days (against 30-35 days).
Nomura, after industry interactions, believes that retail sales has been higher than wholesale volumes and inventory stands at around a month.
"We think that reported volumes at present are lower than replacement demand. We expect a strong recovery in the second half of FY21 on this base as an investment-led recovery occurs," it added.
Nomura expects Ashok Leyland
and Tata Motors
to report more than 40 percent YoY decline in November sales while Prabhudas Lilladher sees around 30 percent decline for both.