November auto sales were a mixed bag: Kotak Sec

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Automobiles
India
Mixed bag: November auto sales were a mixed bag with commercial vehicle sales
showing strong growth despite the change in emission norms while utility vehicle sales
were disappointing. Two wheeler and passenger car sales were in line with
expectations. Mahindra sales fell short of expectations—the company attributed this to
a maintenance shutdown at its plants while maintaining that inventory levels at dealers
is still low.




Maruti sales in line with expectations
Maruti’s domestic passenger vehicle sales were robust (+34% yoy) due to strong demand during
the festive season. Both A2 (+32% yoy) and A3 segments (+27% yoy) grew at a healthy pace
while Eeco continues to have a 2-4 month waiting period. Exports declined by 12% yoy but the
company believes it can achieve its target of 145,000 units in FY2011. We expect Swift and Swift
Dezire to face strong competition from Toyota’s new launch Etios (2010 sedan version) which is
aggressively priced at 496,000-686,000 (ex showroom Delhi) and Etios hatchback expected to be
launched in April 2011.

Mahindra disappoints, as both utility vehicles and tractor sales slow down
Mahindra passenger utility vehicle sales grew by just 6% yoy with tractor sales declined by 26%
MoM. The company attributed this to a maintenance shutdown at its plants in November.
Maxximo and Gio sales showed impressive growth (+41% yoy) as the company rolls out Maxximo
in south Indian states. Tractor sales grew by 43% yoy but were down 26% mom due to a low base
effect. We expect tractor sales to remain buoyant due to expectations of strong Kharif and Rabi
crops.

Tata Motors: CVs overshadow weak PV demand
Strong growth (+20% yoy) beat estimates in commercial vehicle sales despite a sharp rise in prices
due to a change in emission norms from BS-2 to BS-3, indicating that underlying freight demand in
the economy is quite robust. However, overall sales growth was flat dampened by sharp fall in
sales of passenger vehicles i.e. Indica (declined by 37% yoy) and Nano. The company sold only 509
units of Nano—it is in the process of shifting production from Pantnagar to Sanand plant. Tata
Motors raised commercial vehicle prices by upto Rs 40,000 in September due to implementation of
new emission norms which could have led to a fall in demand.

TVS Motors sales moderated but were in line with expectations
TVS Motors reported a 29% yoy growth in sales aided by a low base effect. Sales declined by 20%
mom, indicating that Bajaj Auto could have gained market share from TVS this month. The scooter
segment outpaced the motorcycle segment. Three-wheeler sales maintained its monthly run rate.
Export sales slipped during the month and grew by only 2% yoy. We maintain our cautious
stance on the sector and prefer Mahindra and Mahindra in the space.