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Passenger, commercial vehicle sales likely grew in February; muted customer sentiment may hit two-wheeler numbers

Passenger vehicle volumes should improve due to better chip supplies and healthy orders, while improving freight rates continued to benefit operators of commercial vehicles.

February 28, 2022 / 04:36 PM IST
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Automobile companies are expected to report positive sales figures in the passenger vehicle segment in February following improved chip supplies and healthy order books, analysts said.

Commercial vehicle numbers should be strong too as freight rates improve and infrastructure activity starts building up. However, muted demand and a high base in the year-ago period could hit two-wheeler sales in February.

The Nifty Auto index has been consolidating since the beginning of the current year and fell sharply in the past week following the market correction after Russia invaded Ukraine. The index fell about 7 percent in February, underperforming the frontline Nifty 50, which declined 4 percent.

“Channel checks indicate that commercial vehicles should maintain upward momentum in February,” Emkay Global said. “Passenger vehicle volume growth should also be positive thanks to improving chip supplies. Two-wheeler and tractors are likely to decline due to subdued customer sentiment and the high base effect.”

Motilal Oswal expects passenger vehicles and commercial vehicles to have sustained momentum in February.


“Lacklustre demand for two-wheelers remains a cause for concern, though reopening of school and colleges is creating some demand, but it is not sufficient to boost the segment,” Motilal Oswal said.

Tata Motors and Ashok Leyland shares fell the most in February, down 11 percent. It was followed by Mahindra & Mahindra (down 8.8 percent), Hero Motocorp (down 6 percent), Maruti Suzuki (down 3 percent), Bajaj Auto (down 2 percent) and Eicher Motors (down 0.5 percent). TVS Motor Company gained 4 percent.

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Passenger vehicles

Passenger vehicle volumes should improve due to better chip supplies and healthy orders, said Emkay Global, which estimates domestic volumes to grow by 51 percent YoY for Tata Motors and 23 percent for M&M, while dropping 9 percent for Maruti Suzuki, the market leader.

Given the robust order book, discounts remained low during the month compared with the previous year, the brokerage added.

Nomura expects Maruti Suzuki’s domestic passenger vehicle volumes (ex-Toyota and LCVs) to be about 7 percent lower from a year earlier. Overall volumes are likely to be little changed YoY on higher exports, as per the Japanese brokerage firm. Maruti recently launched a new model of the Baleno, which has received about 25,000 bookings to date.

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According to the global brokerage, M&M’s utility vehicle volumes will likely increase about 30 percent YoY in February on improving supply constraints and a strong order book.

Commercial vehicles

Motilal Oswal expects Ashok Leyland’s commercial vehicle wholesales to grow by 9 percent YoY – with the medium and heavy segment growing 20 percent YoY but light commercial vehicles declining 6 percent.

“We expect Tata Motors’ commercial vehicle wholesales to grow by 13 percent YoY (up 10 percent and 15 percent YoY for M&HCVs and LCVs, respectively). The same for VECV (Volvo Eicher Commercial Vehicle) is expected to grow by 6 percent YoY,” it said.

Nomura said industry wholesale volumes in the commercial vehicle segment are likely to be up 6 percent YoY and industry retail sales could be up 20 percent YoY in February.

“We expect Tata Motors to report 4 percent YoY growth, while Ashok Leyland and Eicher Motors sales are likely up 12 percent and 6 percent YoY,” it said.

Improving freight rates continued to benefit fleet operators, but rising oil prices could impact commercial vehicle sales and hurt their profitability. Fuel prices have not increased significantly in the past few weeks even though international oil prices have risen due to Ukraine-Russia tensions.

Analysts largely expect fuel prices to rise after the assembly elections, given that Brent crude futures, the international benchmark, crossed $100 a barrel. This could delay commercial vehicles purchases in the coming period.

Click Here To Know All Live Updates on Ukraine-Russia War

Hence, there could be some impact on commercial vehicle sales, though finance for purchases is easily available.

“Fleet utilisation levels are estimated to have reached around 80 percent. However, transporters are cautiously adding to their fleet due to the ongoing uncertainty. Financing is not a constraint, but underwriting continues to remain stringent,” said Motilal Oswal.

“The loan-to-value (LTV) continues to remain range-bound at 85-90 percent for large fleet operators, but lower for smaller operators. The latter is cautious while buying trucks as their own equity contribution will rise due to the lower LTV.”

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According to Nomura, two-wheeler retail sales could decline about 5 percent YoY in February. It estimates 27 percent and 14 percent volume declines for Hero Motocorp and Eicher Motors, respectively, while there could be 9 percent and 12 percent fall in volumes for TVS and Bajaj Auto, respectively.

Given the subdued demand, the Japanese brokerage sees downside risks to its industry volume growth estimates for FY22 and FY23.

Motilal Oswal said the market expects some recovery in the upcoming marriage season and as educational institutes open.

“Inventory in the system is 60-75 days (based on current retails). Royal Enfield supplies continue to be plagued by supply-side issues, leading to a waiting period on the Classic 350 and Meteor,” it said.


Tractor sales volumes could decline in double digits given the subdued agriculture demand currently and flat commercial demand.

“Elections are currently under way in many agrarian states in north India, leading to slower demand. Inventory in the system is 25-30 days,” said Motilal Oswal, which expects tractor volumes to decline by 20 percent and 36 percent YoY for M&M and Escorts, respectively.

The high base effect is also expected to impact volumes for tractors.

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