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Festive season brightens volumes…
Volumes perk up but outlook remains cautious…
The commencement of the festive season saw the automotive industry
shift gears and post robust volume numbers. However, demand remains
under pressure as the outlook remains cautious on account of multiple
macro headwinds. The Society of Indian Automobile Manufacturers
(SIAM) has significantly lowered its passenger car growth forecast for
FY12 to 2-4% from its earlier estimate of 10-12% due to lower production
by the market leader Maruti Suzuki due to labour issues and also on
account of higher lending rates. The industry registered figures of ~1.83
million units in September 2011, up 9.2% on an MoM basis. The demand
remained buoyant in the two-wheeler segment driven by robust demand
from Tier-II cities and rural areas coupled with lesser dependency on
vehicle financing (up 26.5% YoY). The volume growth of the industry in
September 2011 has been 21.9% on a YoY basis. Passenger car (PV)
segment grew tepidly at 3.1% YoY but a robust 21.3% YoY (ex-Maruti).
The commercial vehicle (CV) segment continued its robust growth
resulting in a volume increase of 22% YoY driven by the LCV space, up
40.8% YoY.
New festive launches help revive consumer sentiment…
The early start of the festive season due to Navratri beginning in
September vis-à-vis October last year bundled with promotional schemes
and fresh product launches boosted volumes for the month. Moreover,
pre-season dealer stocking was higher during the month with impending
festivities. The companies endeavoured to lure back customers with an
array of new launches notable among which were Honda’s Brio, Nissan’s
Sunny and Mahindra XUV500. Also, Hyundai Eon, which is expected to be
launched in October, will help boost further consumer sentiment. In the
two-wheeler space, the newly launched Bajaj Boxer 150 cc received a
good response selling ~20,000 units during the month.
Unrelenting macro headwinds remain an overhang on volumes…
The cost of ownership continues to remain high with fuel and commodity
prices holding up and high interest rate hurting buyer sentiment,
especially in the passenger vehicle space. Commodities have shown
mixed signs with rubber showing signs of correction while aluminium and
steel witnessed stiffness. According to estimates, global commodity prices
may remain at similar levels or soften slightly in the near to medium term
as the global growth outlook seems to have tapered off from earlier
estimates. Also, another interest rate hike of 25 bps during the month (12
th
hike in 18 months) added to the waning consumer sentiments. The petrol
price hike of | 3.14/litre during September added to the woes. Its impact is
evident in the passenger vehicle category (up 4.8 % YTD).
Industry outlook
We maintain our optimistic outlook towards volume growth in the sector.
We expect an industry wide volume growth of ~13% for FY12E. On an
index performance basis, the BSE Auto index has outperformed the BSE
Sensex with YoY return of -14.7% as compared to -18.2% during the
same period. The demand, which remained buoyant in FY11, has shown
signs of slowing down due to fuel price hikes and higher interest rates.
Among our ICICIdirect.com auto coverage, we remain bullish on frontline
OEM stocks like Tata Motors. In the ancillary coverage, we find favourable
valuation in Exide Industries.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Festive season brightens volumes…
Volumes perk up but outlook remains cautious…
The commencement of the festive season saw the automotive industry
shift gears and post robust volume numbers. However, demand remains
under pressure as the outlook remains cautious on account of multiple
macro headwinds. The Society of Indian Automobile Manufacturers
(SIAM) has significantly lowered its passenger car growth forecast for
FY12 to 2-4% from its earlier estimate of 10-12% due to lower production
by the market leader Maruti Suzuki due to labour issues and also on
account of higher lending rates. The industry registered figures of ~1.83
million units in September 2011, up 9.2% on an MoM basis. The demand
remained buoyant in the two-wheeler segment driven by robust demand
from Tier-II cities and rural areas coupled with lesser dependency on
vehicle financing (up 26.5% YoY). The volume growth of the industry in
September 2011 has been 21.9% on a YoY basis. Passenger car (PV)
segment grew tepidly at 3.1% YoY but a robust 21.3% YoY (ex-Maruti).
The commercial vehicle (CV) segment continued its robust growth
resulting in a volume increase of 22% YoY driven by the LCV space, up
40.8% YoY.
New festive launches help revive consumer sentiment…
The early start of the festive season due to Navratri beginning in
September vis-à-vis October last year bundled with promotional schemes
and fresh product launches boosted volumes for the month. Moreover,
pre-season dealer stocking was higher during the month with impending
festivities. The companies endeavoured to lure back customers with an
array of new launches notable among which were Honda’s Brio, Nissan’s
Sunny and Mahindra XUV500. Also, Hyundai Eon, which is expected to be
launched in October, will help boost further consumer sentiment. In the
two-wheeler space, the newly launched Bajaj Boxer 150 cc received a
good response selling ~20,000 units during the month.
Unrelenting macro headwinds remain an overhang on volumes…
The cost of ownership continues to remain high with fuel and commodity
prices holding up and high interest rate hurting buyer sentiment,
especially in the passenger vehicle space. Commodities have shown
mixed signs with rubber showing signs of correction while aluminium and
steel witnessed stiffness. According to estimates, global commodity prices
may remain at similar levels or soften slightly in the near to medium term
as the global growth outlook seems to have tapered off from earlier
estimates. Also, another interest rate hike of 25 bps during the month (12
th
hike in 18 months) added to the waning consumer sentiments. The petrol
price hike of | 3.14/litre during September added to the woes. Its impact is
evident in the passenger vehicle category (up 4.8 % YTD).
Industry outlook
We maintain our optimistic outlook towards volume growth in the sector.
We expect an industry wide volume growth of ~13% for FY12E. On an
index performance basis, the BSE Auto index has outperformed the BSE
Sensex with YoY return of -14.7% as compared to -18.2% during the
same period. The demand, which remained buoyant in FY11, has shown
signs of slowing down due to fuel price hikes and higher interest rates.
Among our ICICIdirect.com auto coverage, we remain bullish on frontline
OEM stocks like Tata Motors. In the ancillary coverage, we find favourable
valuation in Exide Industries.
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