Auto volumes have shown a smart pick-up in the month of April, despite the stress in rural India. The pick-up, as estimated by the Street, has been led by a pick-up in urban demand and last year's low base.
A revival in economic and industrial activity is also driving commercial vehicle sales. But how sustainable is this trend? Lower fuel and interest costs, return of the first-time car buyer and a general improvement in sentiment is driving urban demand, claim analysts, which should sustain through the fiscal year.
The category that continued to show sluggishness and volume decline is motorcycles while scooters grew at a healthy pace in April. Scooter volumes for both Honda and TVS continued to grow in double digits, while motorcycle volumes contracted.
While the Society of Indian Automobile Manufacturers estimate (SIAM) expects the two-wheeler segment to fare better in FY16 compared to passenger cars, the trend in April is different.
Hero MotoCorp's monthly volumes declined 6.6% year-on-year while Bajaj Auto declined 4.6%. Volume growth of TVS were supported by scooter volumes.
According to IIFL, "Scooters growth remained strong with TVS Motors and Honda Motorcycle & Scooters India reporting growth of 7.2% YoY and 15.9% YoY, respectively. Weakness in motorcycles is primarily on the back of subdued demand from rural India."
In contrast, Maruti reported a robust 27% year-on-year growth in domestic volumes. However, the company's retail sales grew 18%.
Inventories at dealerships have increased to four weeks in April against three weeks in March, which has resulted in higher-than-expected wholesale volumes. Analysts expect Maruti to report 12-14% growth in volumes in FY16. Kotak Institutional Equities expects Maruti to increase marketshare in the current year.
Along with Maruti, Tata Motors too reported a 57% jump in passenger car sales on the back of its new launches. Motilal Oswal Securities expects Tata Motors to report a overall volume of 28% in FY16 and a 30% growth in heavy and medium commercial vehicle segment.
The uptrend in commercial vehicle sales also continued in the month of April. Tata Motors reported a 21% year-on-year growth in MHCV volumes, while Ashok Leyland reported a 44% jump. Light commercial vehicles are showing a mixed trend.
Tata Motors reported an overall 15% decline in LCV sales, Ashok Leyland and Eicher Motors reported a growth. Analysts are building in a strong growth for this category as well, as economic activity picks up in FY16.
No comments:
Post a Comment