Angel Broking's report on automobile sector
The Auto sector witnessed a mixed volume performance in March 2014, broadly on expected lines, with two-wheeler (2W) sales growing at a healthy pace and commercial (CV) and passenger vehicle (PV) sales continuing to be sluggish. Tractor sales too moderated during the month after having witnessed a stellar performance in the first eleven months of FY2014. The recent cut in excise duty during the Interim Budget which was passed on to the consumers failed to boost sales, indicating that the economic slowdown and higher interest rates continue to weigh on demand. In the near term, we expect demand outlook to remain weak, particularly for CVs, primarily due to the uncertain macro-economic environment. In the long run though, expected easing of interest rates, following expected tapering of inflation will revive demand and would be the key driver for volume growth.
Tata Motors' total volumes declined 29.6 percent yoy as continued slowdown in domestic CV sales impacted the overall performance. On a sequential basis though, volumes grew by 28.1 percent, led by 35 percent and 11.4 percent yoy growth in CV and PV sales respectively. The intensity of the fall in MHCV sales has lessened over the past three months due to the base effect and also due to gradual increase in freight rates.
Ashok Leyland registered a steep decline of 26.6 percent yoy in total sales led by a 20.3 percent yoy decline in MHCV sales. MHCV sales remain impacted mainly due to the prevailing economic slowdown. LCV sales too registered a substantial decline of 40.7 percent yoy.
Maruti Suzuki India's total sales declined 5.5 percent yoy, led by weakness in domestic demand. The volume numbers, however, are slightly higher than our expectations. Domestic sales declined 5.2 percent yoy despite the successful launch of the Celerio, on account of weakness in the Mini and Super Compact segments. Export volumes too continued with the downward trend and registered a decline of 8 percent yoy, mainly due to termination of supplies in the European region
Mahindra and Mahindra reported better-than-expected sales, benefitting from the sharp reduction in excise duty announced during the Interim Budget and also on account of the election-led buying in some regions. Total volumes stood flat during the month. Automotive sales declined marginally by 0.5 percent as PV sales continued to slide (down 9.3 percent yoy); the quantum of fall though was lower than in the past few months. This is on account of reduction in excise duty which has increased consumer inquiries in the last two months. Tractor sales too moderated during the month and grew by 2 percent yoy led by 6.6 percent yoy growth in domestic sales.
Two-wheelers and three-wheelers: Bajaj Auto reported lower-than-expected sales. Its total sales grew marginally by 1 percent yoy with domestic sales disappointing once again, despite new launches. Export volumes though continued their strong traction, posting a robust growth of 16.6 percent yoy, driven by continued momentum in Africa.
Hero MotoCorp reported in-line volumes led by continued traction in rural markets which led to an 11.9 percent yoy (3.9 percent mom) growth during the month. TVS Motor reported a strong volume growth of 17.4 percent yoy, which is better than our expectations, driven by strong volume growth in scooters and three-wheelers (3Ws). Exports continued with its strong run, witnessing a robust growth of 28.3 percent yoy.
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