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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key items this month
What is changing? We analyze: (1) the impact of the replacement of old fuelefficient
car subsidy with much stricter new subsidy policy, the increasing
competitive pressure in the medium- and low-end SUV segment as more and
more local-branded SUVs enter the Chinese car market and the signal of a new
round of price war in the car market with the upper medium-end segment facing
the brunt of price discounting in China; (2) Suzuki’s decision to dissolve its
cross-shareholding relationship with VW in Japan; (3) the favorable margin
outlook of tire industry on the back of declining natural-rubber prices in Korea;
(4) the expected weak festive car demand due to weaker consumer sentiment
driven by high interest rates and fuel prices in India; (5) weak Taiwan auto sales
in August, down slightly 4% Y/Y, but sequentially 41% M/M, reflecting the
seasonal weakness of the lunar calendar of July, where customers tend not to
buy cars or property in Taiwan; and (6) the implications of Astra’s move to cut
down-payments on Toyota Avanza in a post-Lebaran promotion in Indonesia.
Information: We discuss: (1) the impact of BMW’s recall of 3-series cars in
the US to fix a rear-light defect and the likely joint venture between Guangzhou
Auto and JEEP in China; (2) the sharp rise in August domestic sales volume on
the back of the progress in resolving supply shortages and Toyota’s continuous
market-share gain in Japan; (3) Kia’s launch of a new compact car model “All
New Pride” in Korea; (4) Honda’s launch of hatchback “Brio” with aggressive
pricing and HMSI’s capacity expansion plans with the commencement of
groundwork on its third two-wheeler plant in India; (5) the implications of
TWD’s depreciation against JPY and the negative correlation between strong
JPY and auto margins in Taiwan; and (6) the impact of the local assembly of
Peugeot cars beginning 2012 and the appointment of new heads at Ford and
Mazda in Indonesia.
Non-consensus calls: We highlight: our recommendation to invest in Tata
Motors on the current weakness, as: (a) the valuations appear to already factor
in the challenging environment ahead; (b) JLR’s soon-to-be-launched ‘Evoque’
will create a new segment for Land Rover; (c) China, which accounts for 15%
of its volumes, is likely to witness a healthy growth over the near term, in India.
India
Festive demand to be weaker: The Indian car market is expected to witness sedate
demand this festive season given weaker consumer sentiment driven by higher
interest rates and fuel prices.
We reiterate our view that Maruti (MRTI.BO, Neutral) will face headwinds over the
near term as growth rates moderate and competition intensifies.
Mr. P Balendran, Vice President of GM India (Economic Times) said, “Carmakers
generally see a growth of 20% or more in volumes during the festival season.
However, now with an unprecedented hike in interest rates, hike in petrol prices, high
inflation, and negative market sentiments we are not expecting incremental volume
of more than 5% during this festival season.”
Since July 2009, petrol prices have risen by 60% in India and interest rates have
moved up by c 300 bps. This is already impacting demand for automobiles and we
expect sales to be impacted further. Growth rates for passenger cars have moderated
to just 2% yoy given the rising cost of ownership. Last week’s fuel price and interest
rate hike has dampened sentiments further.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key items this month
What is changing? We analyze: (1) the impact of the replacement of old fuelefficient
car subsidy with much stricter new subsidy policy, the increasing
competitive pressure in the medium- and low-end SUV segment as more and
more local-branded SUVs enter the Chinese car market and the signal of a new
round of price war in the car market with the upper medium-end segment facing
the brunt of price discounting in China; (2) Suzuki’s decision to dissolve its
cross-shareholding relationship with VW in Japan; (3) the favorable margin
outlook of tire industry on the back of declining natural-rubber prices in Korea;
(4) the expected weak festive car demand due to weaker consumer sentiment
driven by high interest rates and fuel prices in India; (5) weak Taiwan auto sales
in August, down slightly 4% Y/Y, but sequentially 41% M/M, reflecting the
seasonal weakness of the lunar calendar of July, where customers tend not to
buy cars or property in Taiwan; and (6) the implications of Astra’s move to cut
down-payments on Toyota Avanza in a post-Lebaran promotion in Indonesia.
Information: We discuss: (1) the impact of BMW’s recall of 3-series cars in
the US to fix a rear-light defect and the likely joint venture between Guangzhou
Auto and JEEP in China; (2) the sharp rise in August domestic sales volume on
the back of the progress in resolving supply shortages and Toyota’s continuous
market-share gain in Japan; (3) Kia’s launch of a new compact car model “All
New Pride” in Korea; (4) Honda’s launch of hatchback “Brio” with aggressive
pricing and HMSI’s capacity expansion plans with the commencement of
groundwork on its third two-wheeler plant in India; (5) the implications of
TWD’s depreciation against JPY and the negative correlation between strong
JPY and auto margins in Taiwan; and (6) the impact of the local assembly of
Peugeot cars beginning 2012 and the appointment of new heads at Ford and
Mazda in Indonesia.
Non-consensus calls: We highlight: our recommendation to invest in Tata
Motors on the current weakness, as: (a) the valuations appear to already factor
in the challenging environment ahead; (b) JLR’s soon-to-be-launched ‘Evoque’
will create a new segment for Land Rover; (c) China, which accounts for 15%
of its volumes, is likely to witness a healthy growth over the near term, in India.
India
Festive demand to be weaker: The Indian car market is expected to witness sedate
demand this festive season given weaker consumer sentiment driven by higher
interest rates and fuel prices.
We reiterate our view that Maruti (MRTI.BO, Neutral) will face headwinds over the
near term as growth rates moderate and competition intensifies.
Mr. P Balendran, Vice President of GM India (Economic Times) said, “Carmakers
generally see a growth of 20% or more in volumes during the festival season.
However, now with an unprecedented hike in interest rates, hike in petrol prices, high
inflation, and negative market sentiments we are not expecting incremental volume
of more than 5% during this festival season.”
Since July 2009, petrol prices have risen by 60% in India and interest rates have
moved up by c 300 bps. This is already impacting demand for automobiles and we
expect sales to be impacted further. Growth rates for passenger cars have moderated
to just 2% yoy given the rising cost of ownership. Last week’s fuel price and interest
rate hike has dampened sentiments further.
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