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Automobiles
India
Auto demand resilient in March. Our interaction with dealers and financiers indicates
demand for cars and commercial vehicles is likely to be strong in March while twowheeler and tractor demand is likely to moderate. Strong demand for diesel cars and an
increase in diesel-engine capacity led to a pick-up in car demand in February and
March. Commercial vehicle demand is also holding up well due to good crops and
resilient domestic consumption.
March is likely to be the best month in FY2012E for domestic car volume growth
The domestic passenger-car segment is likely to report 13-15% yoy volume growth in March 2012,
driven by an increase in diesel-engine capacity by manufacturers and pick-up in sales of petrol
models. Honda Motors’ volumes have also picked up as supply constraints from Thailand have
eased. Most manufacturers are likely to report strong volume growth in March. Diesel models have
5-6 month waiting periods while commentary from sales people at dealerships is extremely bullish
at this juncture.
Most passenger-car manufacturers are looking to increase diesel-engine capacities due to strong
demand for diesel models. Maruti Suzuki is expanding its capacity from 240,000/year in FY2012 to
300,000/year in FY2013E and is sourcing 100,000 additional diesel engines from Fiat. Ford Motors
is expanding diesel-engine capacity from 250,000 units/year to 330,000 units/year by mid 2012.
Maruti and Hyundai have also announced plans to set up diesel-engine capacities of about
150,000 each by the end of CY2013E. Diesel-car volumes have grown by 35% yoy over April
2011-February 2012 while petrol model volumes declined by 15% yoy. Diesel cars now form
about 30% of domestic passenger-car volumes according to Crisil estimates.
We expect petrol volumes to remain flat yoy and diesel volumes to increase by 40% yoy in FY2013
which is likely to result in 12% yoy volume growth for the domestic car industry. Crude prices
have risen sharply over the past few months and if petrol prices are increased further, petrol
volumes will decline sharply and we could see downside risk to our volume estimates. Dealer
inventory levels are at normal levels for the car segment.
Two-wheeler and tractor volume growth is likely to moderate
We expect motorcycle volumes to grow by 8-10% yoy in March 2012. Retail volumes continue to
remain weak in the motorcycle segment, driven by a shift towards the scooter segment and
slowdown in executive and premium segment motorcycle volumes. Dealer inventories have also
increased to 30-40 days versus normal levels of 20-22 days. Tractor volumes are likely to decline in
March as crop prices have remained static over the past few months and M&M stopped
production for four days in March to correct dealer inventories. Monsoons hold the key for volume
growth in the tractor segment for FY2013E, in our view.
Truck demand resilient but discounts increase as dealers clear inventories
Our interaction with truck dealers and financiers indicate that demand for trucks picked up in
4QFY12 despite slowing industrial production. The key reasons for the pick-up are an increase in
cement volume growth, reasonably buoyant automobile growth and good agricultural production.
The mining and capital goods segments remain weak. Dealers indicated that heavy truck
manufacturers were offering 3-4% discount on vehicle prices to clear excess dealer inventories.
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