Automobiles (wholesale) - Domestic sales reach historic highs ahead of festive season - ICICI Securities

Two-wheeler (2W): Wholesale push as countdown to festive ends in Nov'20

- Hero MotoCorp (Hero) has reported highest ever sales of ~807k units, up 35% YoY. Domestic motorcycles outperformed scooter as it grew ~60% vis-à-vis 33% (for latter). Hero mentioned that inventory levels have reached management's pre-festive expectations. Overall domestic sales grew 35% YoY, while exports grew 28% YoY.

- Royal Enfield has reported ~7% YoY decline to 66.9k units, with new product launch (Meteor) likely to drive growth in H2FY21. Motorcycle sales in 350cc segment declined 6% YoY to ~60k units, while above 350cc segment continued to lag down 17% to ~6.4k units as exports fell 9% YoY to 4k units. Key monitorable for the company remains the sustenance of discretionary demand post the festive season.

Passenger vehicles (PVs): Discounts rise as competition intensifies in SUVs

- Maruti Suzuki (Maruti) has reported strong dispatch growth of 19% YoY at ~182k units. However, mini-vehicle segment surprisingly reported flat growth at ~28.5k units, while compact segment grew 27% YoY to ~95k units. Ciaz volumes continued to decline (down 40%) to 1,422 units. UV segment dispatches grew only 10% YoY at ~25k units, while dispatches to Toyota grew 121% to 6k units (likely due to Brezza variant-Urban Cruiser launch). Exports grew 5% to ~9.6k units.

- Mahindra & Mahindra's (Mahindra) volumes reported 1% YoY growth to ~18.6k units with UV segment growing 3% YoY to ~18.3k units. UV segment growth is below market possibly due to better competitive performance in urban markets from OEMs like Hyundai/Kia. M&M's new model Thar has yet to build meaningful dispatches, is likely to witness growth from Nov'20 onwards.

- As per media reports, Tata Motors posted highest volume growth amongst all PV OEMs of 79% YoY in at 23.6k units. PV sales stood at ~21.2k units, up 163% YoY, maintaining its position as the 3rd largest player as incremental market share gains were driven by relatively better demand for models like Altroz and Nexon.

- Hyundai posted highest ever domestic volumes at 56k units, up 13% YoY, while exports declined 10% YoY to 12.2k units. The company is witnessing strong sales from the recently launched second-generation Creta, Venue iMT and Aura models.

- Kia Motors has reported 64% YoY growth to ~21k units, (short of highest monthly sales volumes at ~23.8k units in Sep'20). The recently launched compact SUV Sonet has already received strong response (media reports suggest >50k bookings so far) and may drive further volume growth for Kia Motors.

- MG Motors' Hector, launched in Jul'19, and the recently launched Hector Plus, are growing steadily to reach highest ever sales of 3,750 units (up 6% YoY).

Our view: Oct'20 dispatches are a sign of continued festive growth expectations of OEMs as second phase of festive season kicks-off in Nov'20; however, rising discounts do not correlate with demand strength narrative. We believe channel inventory clearance remains key dealer task (our est.: >6 weeks) in Nov'20, thus, any slack in retail demand could disrupt wholesale dispatches of OEM's in Dec'20/Jan'21.

- Toyota's volumes were up 4% YoY to ~12.4k units. Launch of its Urban Cruiser Compact SUV (rebadged version of Maruti Brezza SUV) in September'20 has boosted sales for Toyota.

- Honda's volumes grew 8% YoY to ~10.8k units, lack of attractive compact SUV offerings have seemingly hampered growth rebound.

CVs: M&HCV still a laggard as demand rebound slowly in LCVs; rural uplift supports tractor sales

- Eicher Motors' CV segment volumes grew 12% YoY to 4.2k units.

- Escorts' tractor volumes rose 2% to ~13.6k units. Domestic volumes improved a similar 1% YoY at ~13.2k units while exports stood at 484 units. Volumes were supported by better monsoon, kharif sowing and better crop price realisations.

- Mahindra & Mahindra's (Mahindra) CV segment volumes declined 13% YoY at ~20.6k units as LCV declined a similar 13%. Volumes in 3W segment dropped sharply by 56% to 3,118 units.

- Tractor dispatches showed marginal 2% improvement to ~46.5k units as domestic sales were up 2% to ~45.6k units (even on a high base). With very good monsoon, higher kharif acreage, and continued government support including higher MSP, revival of agrarian and rural demand recovery will be key monitorables in kharif season.

Source : Equity Bulls

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