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SECTOR UPDATE
Automobiles
On a bumpy road
Maruti Suzuki - The show-stopper in Feb 2012
Maruti Suzuki (Maruti) surprised positively with domestic sales breaching the 1 lakh unit mark yet again in February 2012. The Swift and the recently launched compact Dzire evoked a good response from the market leading to healthy sales. An improvement was also witnessed in the multi purpose vehicle (MPV) segment which had been under pressure a couple of months ago.
Hard landing in tractors; worst performance in a seasonally high month
A slowdown was witnessed in the tractors segment with Mahindra & Mahindra (M&M) reporting a drop in volumes by 21% year on year (YoY) in February 2012. The growth in the tractor industry for April 2011-January 2012 has slipped to 15.5% YoY from a growth of 19.8% YoY witnessed in the April 2011-October 2011 period. Going by the market leader M&M's tractor numbers in February 2012, the year till date (YTD) growth (April 2011-February 2012) is estimated to further slip to 12-13%.
Higher interest rates and an increase in input costs for farmers are the key reasons attributable to a slow down in the growth of tractor sales. Overall, the industry is estimated to grow by about 10% in FY2012, which is about half the growth rate witnessed in H1FY2012.
LCVs shine; continue to outperform other auto segmentsThe light commercial vehicle (LCV) segment has been the star performer showing no signs of a slowdown. The hub and spoke model adopted in the logistics industry has fuelled demand for LCVs towards last mile connectivity. LCVs continue to grow in excess of 25% YoY, growing 26.3% YTD in the domestic market.
Moderation seen in two-wheelersGoing by TVS Motors' and Hero MotoCorp's February 2012 volumes; two-wheelers are also witnessing a moderation in growth. Reports indicate higher dealer inventory with no waiting period. While the super bike segment is expected to grow well on a small base, the entry and executive segments are likely to grow in single digits. For Bajaj Auto, we expect an 8.5% YoY growth in February 2012 volumes.
No pre-budget buying seen; consensus building for rollback of excise concessions Given a general perception of a higher duty on automobiles in union budgets, we did not see any major advancement in buying. There is an impending risk that overall sentiments may deteriorate further if there is a rollback of excise from 10% to 12% and if there's an additional duty levied on diesel vehicles.
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