Automobiles Sales Update - Not so August - Edeweiss

August was another weak month for auto sales. Car, two wheeler, truck, and tractor sales stayed under pressure whereas UV and LCV posted positive growth. While weak monsoon dampened rural sentiments, high interest rates, high inflation, and slowing economy took a toll on urban demand. We prefer Bajaj Auto and Tata Motors for being export stories amidst the domestic slow down.

Passenger vehicles: UVs in fast lane; petrol cars under pressure

Car makers with favourable base and higher contribution of UVs reported growth, whereas most others posted a dull month. Maruti Suzuki's (MSIL) car portfolio shrunk a significant 50% YoY due to production losses at Manesar. Hyundai India reported a decline of 8% YoY. Mahindra & Mahindra (M&M) continued to benefit from strong UV demand and new launches; hence, reported 41% YoY growth.

Commercial vehicles: Heavy vehicles on skid row

Fall in MHCV sales has been receding as inventory correction efforts are yielding results. However, the light commercial vehicle segment continued to benefit from shift to the hub-and-spoke model. While Tata Motors (TTMT) reported 12% YoY decline in MHCVs, LCVs grew 15.6% YoY. Eicher Motors (EIM) reported 7% growth in total CV sales. Ashok Leyland (ALL) is yet to report sales figure.

Tractors: Drought fear nips demand

Weak monsoon continues to play spoilsport for tractor demand. Despite recovery in monsoon in August, retail demand did not improve. As a result, M&M's domestic sales declined 17.7% YoY.

Two wheelers: Doddering demand

Weakness continued in this segment with YoY sales decline of 10% and 12% for Bajaj Auto (BAL) and Hero MotoCorp (HMC), respectively. TVS Motors (TVS) also reported a decline of 20% in the segment. Honda Motors (HMSI) bucked the trend due to favourable base and reported total sales growth of 39%. We expect Royel Enfield to report sales of 10k units (yet to publish numbers).

Source : Equity Bulls

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