In case of Eicher Motors, Nomura expects overall commercial vehicle volumes to decline 33 percent YoY
The slowdown is expected to continue across auto segments in August amid economic slowdown, deferral of purchases, slow lending and confusion among consumers over BS-VI transition.
In fact, the auto sector – as a whole – has been under pressure for almost a year now due to above concerns. The Nifty Auto index itself fell most among sectors, down 35 percent against 4 percent fall in Nifty50.
Auto as well as auto ancillaries like Tata Motors, Motherson Sumi, Ashok Leyland, Eicher Motors, M&M, Bharat Forge, Exide Industries, TVS Motor Company, Maruti Suzuki and Apollo Tyres were down 30-54 percent in last one year.
Brokerages feel the fall in auto sales could remain in double digit in month gone by, with commercial vehicles segment showing the biggest fall among all.
Medium and heavy commercial vehicle (M&HCV) sales are likely to decline sharply by 44 percent in August and passenger vehicle sales could fall by 31 percent compared to same month last year while two-wheeler volumes may decline 22 percent YoY, Nomura said in its report.
The Japanese brokerage sees Maruti Suzuki, the country's largest car maker, reporting 33 percent YoY decline in overall volumes.
Mahindra and Mahindra's utility vehicle volumes should also decline 13 percent YoY, said Nomura which expects Ashok Leyland M&HCV volumes may be down 47 percent and Tata Motors may see its M&HCV volume declining 45 percent YoY.
In case of Eicher Motors, the brokerage expects overall commercial vehicle volumes to decline 33 percent YoY.
In the two-wheeler space, country's largest two-wheeler maker Hero MotoCorp is expected to report a 26 percent YoY decline in volumes and TVS' domestic volume is likely to decline by 20 percent, it said.
Royal Enfield volumes are also expected to drop 17 percent Yoy, though it is likely to improve MoM to 58,000 units, said Nomura, adding Bajaj Auto may report a 19 percent YoY decline in the domestic 2-wheeler segment.
Nomura has buy recommendation only on M&M among original equipment manufacturers and prefers Minda Industries among auto component makers.
"The slowdown in the automobile space is largely on account of muted economic sentiments domestically wherein customer confidence is low, thereby resulting in lower walk-in at dealership stores. While conversion rates have not necessarily dropped, deferral of purchases is a reality, with automobiles not a current consumer priority," said ICICI direct after meeting auto companies in an auto conference hosted by ICICI Securities.
The brokerage further said the consumer was also puzzled by the BS-VI transition and is awaiting a firm policy signal on GST rate cut for the automobile space. "In essence, the customer does not want to lose out in case there is a GST rate cut in the near term, which, we believe, is hard to come by, given the fiscal prudence being practised by the government."
Q1FY20 was a challenging quarter for all auto OEMs with Q2FY20E expected to be no different, it feels.
Nomura in its Q1FY20 review report said sales for autos/auto parts have been the biggest drag with aggregate revenue for 15 companies in its coverage universe (ex-Tata Motors) declining 2 percent YoY, led by a slowdown in domestic volume growth. Passenger vehicle, two-wheeler, light commercial vehicle and MHCV industry volumes fell 18 percent, 11.7 percent, 6.7 percent and 16.5 percent YoY respectively in Q1FY20.
However, in the second half of FY20 - with normalised channel inventory, base effect kicking in as well as festival dates - the industry expects a revival in auto demand to finally end 2019 flat to marginally negative, ICICI direct said.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.
The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .