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Volumes fizz out post festivities…
October sales indicate September spurt to ease off.…
The volume pace witnessed by the industry in the previous month hit a
speed barrier in October. The macroeconomic headwinds took their toll
on volume growth as high interest rates and soaring fuel prices dampened
consumer sentiments across segments. However, the sequential volume
shrinkage was expected as sales were higher in September as dealers
stocked inventory for festive buying in October. Also, on a YoY basis, the
growth remained subdued as the festive season was in November last
year. Hence, there were higher sales in October 2010. The industry posted
~1.67 million units for October 2011 (down 8.7% on an MoM basis).
PV sales continue to slide… Two wheelers joining the pack…
The Society of Indian Automobile Manufacturers (SIAM) had recently
pruned its passenger car growth forecast for FY12 to 2-4% from its earlier
estimate of 10-12%. October sales justify the downward revision. The PV
category registered de-growth of 16.8% YoY owing to production
disruption confronted by market leader Maruti Suzuki due to labour
issues. Consumer demand waned as higher cost of vehicle ownership led
to balked purchases. Two wheeler sales had remained buoyant till
September owing to lesser dependence on financing and supported by
robust demand from Tier II cities and rural areas. However, the segment’s
resistance ended in October as the category witnessed a decline of 7.3%
MoM and grew sluggishly at 3.5% YoY. The largest player in the space,
Hero MotoCorp witnessed a sales decline of 6.8% MoM and a tepid 1.3%
YoY growth.
The commercial vehicle (CV) segment outperformed the industry growth
rate as volumes advanced 14.6% YoY driven by robust volumes in the
M&HCV space (up 16.1% YoY). The LCV space witnessed slower growth
(up 13.5% YoY) as volume leader Tata Motors reported flattish volumes in
the LCV category (up 1% YoY) owing to the curfew imposed in the
Pantnagar region during the month.
Headwinds’ retreating but outlook remains cautions…
The RBI has indicated towards a pause in interest rate hikes. This shift in
stance from anti-inflationary to growth orientated is expected to provide
some respite for the interest rate sensitive passenger vehicle and M&HCV
segments. The September IIP numbers were dismal at 1.9%. Hence, we
believe the interest rate hike cycle has peaked out. This, coupled with
softening commodity prices would result in lower cost of ownership and
improved consumer sentiments. Moreover, one commodity that remains
critical to the auto sector i.e. natural rubber has moderated from its peak
and is currently at ~| 212 with prices correcting further in November.
According to our estimates, global commodity prices may soften slightly
as the global growth outlook seems to taper off. However, further hikes in
petrol prices and a possible levy of additional duty on diesel vehicle could
dent buying sentiments.
Industry outlook
We continue to 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
performed better than the BSE Sensex with YoY return of -10.3% vs. -
14.8% during the same period. 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 �� ��
Volumes fizz out post festivities…
October sales indicate September spurt to ease off.…
The volume pace witnessed by the industry in the previous month hit a
speed barrier in October. The macroeconomic headwinds took their toll
on volume growth as high interest rates and soaring fuel prices dampened
consumer sentiments across segments. However, the sequential volume
shrinkage was expected as sales were higher in September as dealers
stocked inventory for festive buying in October. Also, on a YoY basis, the
growth remained subdued as the festive season was in November last
year. Hence, there were higher sales in October 2010. The industry posted
~1.67 million units for October 2011 (down 8.7% on an MoM basis).
PV sales continue to slide… Two wheelers joining the pack…
The Society of Indian Automobile Manufacturers (SIAM) had recently
pruned its passenger car growth forecast for FY12 to 2-4% from its earlier
estimate of 10-12%. October sales justify the downward revision. The PV
category registered de-growth of 16.8% YoY owing to production
disruption confronted by market leader Maruti Suzuki due to labour
issues. Consumer demand waned as higher cost of vehicle ownership led
to balked purchases. Two wheeler sales had remained buoyant till
September owing to lesser dependence on financing and supported by
robust demand from Tier II cities and rural areas. However, the segment’s
resistance ended in October as the category witnessed a decline of 7.3%
MoM and grew sluggishly at 3.5% YoY. The largest player in the space,
Hero MotoCorp witnessed a sales decline of 6.8% MoM and a tepid 1.3%
YoY growth.
The commercial vehicle (CV) segment outperformed the industry growth
rate as volumes advanced 14.6% YoY driven by robust volumes in the
M&HCV space (up 16.1% YoY). The LCV space witnessed slower growth
(up 13.5% YoY) as volume leader Tata Motors reported flattish volumes in
the LCV category (up 1% YoY) owing to the curfew imposed in the
Pantnagar region during the month.
Headwinds’ retreating but outlook remains cautions…
The RBI has indicated towards a pause in interest rate hikes. This shift in
stance from anti-inflationary to growth orientated is expected to provide
some respite for the interest rate sensitive passenger vehicle and M&HCV
segments. The September IIP numbers were dismal at 1.9%. Hence, we
believe the interest rate hike cycle has peaked out. This, coupled with
softening commodity prices would result in lower cost of ownership and
improved consumer sentiments. Moreover, one commodity that remains
critical to the auto sector i.e. natural rubber has moderated from its peak
and is currently at ~| 212 with prices correcting further in November.
According to our estimates, global commodity prices may soften slightly
as the global growth outlook seems to taper off. However, further hikes in
petrol prices and a possible levy of additional duty on diesel vehicle could
dent buying sentiments.
Industry outlook
We continue to 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
performed better than the BSE Sensex with YoY return of -10.3% vs. -
14.8% during the same period. 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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