PINC Sector Report – Automobile August Sales Update - No Letting Down

In a traditionally weak month for the automobile sales, Indian automobile industry maintained their momentum with over 25% growth. Most of the manufacturers operated at the full capacity utilisation and still failed to meet the demand. Historically, manufacturers starts to increase the dealer inventory during this time to meet the peak demand during festive season. However, during the current year due to strong demand, inventory levels remain low with dispatches going into inventory replenishment only.

Across the segments, major manufacturers reported their all time high dispatch figures. Commercial vehicles segment especially heavy duty segment continues to be a beneficiary of demand preponement happening due to impending emission norm changes. In the passenger vehicles segment, even Top-10 cities are now witnessing strong demand. In the tractors, due to normal monsoons and improving demand from infrastructure sector, we expect strong growth in coming months.

Our Viewpoint

Given the current phase of strong demand, we believe industry is not geared to meet festive season demand and this will lead to pent-up demand in post festive season months. Entry of new players and new launches are further stimulating the automobile demand. We remain positive on the growth prospects of the sector. Our top picks in the sector are Mahindra & Mahindra, Bajaj Auto and Hero Honda.

Source : Equity Bulls

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