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Last Updated : Sep 30, 2020 10:04 AM IST | Source: Moneycontrol.com

Smooth drive likely for auto sales in September; tractors, PVs, 2Ws volumes to rise

The recovery in the automobile industry has been faster than expected. Jefferies says personal vehicle and two-wheeler registrations have held up well in recent weeks.

 
 
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Auto sales may continue to show an uptrend in September, especially in tractors, passenger vehicles (PVs) and two-wheelers (2Ws), brokerages and industry observers have said.

Tractors, PVs and 2Ws volumes may show an uptick supported by improving retail and inventory build-up with dealers before the festival period.

The recovery in the automobile industry has been faster than expected. Axis Securities highlighted that the industry seems to be recovering from the coronavirus blow on the back of the robust rural economy, pent-up demand, a shift in preference for personal mobility over shared mobility and the need to maintain distance.

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"The industry volumes are showing a healthy sequential recovery led by tractors and 2Ws and followed by PVs and CVs. Based on our recent channel checks, the inquiry levels are increasing and the dealers are witnessing healthy demand, especially from the rural and semi-urban areas," Axis Securities said.

Global brokerage firm Jefferies said that PV and 2W registrations have held up well in recent weeks.

According to CNBC-TV18, Jefferies said PVs were down just 4 percent last week, though 2Ws were still down 24 percent year on year.

Trucks, while still low in absolute terms, have been improving sequentially and app activity for taxi aggregators has improved but still below pre-COVID level, Jefferies said.

As per brokerage firm Emkay Global Securities, growth in tractors is expected at 15-18 percent YoY to 97,000-1,00,000 units, thanks to the positive rural sentiment.

"As per our checks, states with strong growth are Karnataka, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Maharashtra, Gujarat, Tamil Nadu, Rajasthan, Haryana and Punjab. Escorts and Mahindra & Mahindra are likely to grow 19 percent and 17 percent YoY, respectively, in the domestic market," said the brokerage.

Emkay is of the view that the domestic PV industry volumes may grow over 20 percent YoY, helped by growth across OEMs (barring Toyota, VW group and Ford).

"Domestic volumes should grow 135 percent for Tata Motors, 25 percent for Maruti Suzuki and 14 percent for Mahindra & Mahindra," Emkay said.

"Growth for Tata Motors has been aided by the low base and new model— Altroz," Emkay added.

As far as domestic 2W volume is concerned, Emkay expects it to grow 13 percent YoY for Bajaj Auto, 10 percent for Hero MotoCorp, 1 percent each for Eicher Motors (Royal Enfiled) and TVS Motor.

"Eicher Motors (Royal Enfiled) volume may rise 17 percent month-on-month (MoM) but remain muted YoY due to a slow ramp-up in utilisation levels at its plants," Emkay said.

Domestic commercial vehicle (CV) industry volumes are subdued YoY but improving on a sequential basis.

"The fall is higher in MHCVs than in LCVs. Domestic CV volumes are expected to be flat YoY for Mahindra & Mahindra, while a decline by 4 percent for Ashok Leyland, 9 percent for Tata Motors and 20 percent for Eicher Motors," Emkay said.

Emkay expects volumes to improve in the coming quarters on better rural sentiment, low-interest rates, improving finance availability and a gradual pick-up in business and economic activity.

Global brokerage firm CLSA said activity levels are improving in the commercial vehicle segment but new truck buying could follow with a lag.

As per CNBC-TV18, CLSA said the near-term outlook for CVs is improving and cyclical, economic recovery should benefit truck volume.

CLSA recommends playing the CV cycle via Ashok Leyland and Shriram Transport.

"Truckers have been able to pass on the recent fuel price hikes and freight is back to 70-80 percent of pre-COVID level for industrial goods. Freight for FMCG, e-commerce and agri sector crossed pre-COVID level," CLSA said.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Sep 30, 2020 10:04 am
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