UVs and LCVs were the brighter spots in an otherwise lacklustre August. Two-wheeler sales declined for the first time in the last three years. The decline in car sales was further aggravated by the lockout at Maruti while the pace of decline has receded for heavy trucks. Given the slowdown, all OEMs are in inventory correction mode. Our inventory indicator hints at correction in cars and trucks whereas it is still high for two wheelers.
We are launching ‘Auto Compass’, our monthly review of the auto sector, detailing prevailing trends across segments and sub-segments in the sector.
Personal vehicles: UVs drive growth
· Cars: Slowdown and lock out at Maruti Suzuki (MSIL) affected car sales which plunged 19% YoY. MSIL lost 13% market share MoM. The lockout also led to an industry inventory correction. UV segment, which saw a growth of 71%, benefitted from strong rural demand as well as high preference for XUV5OO, Renault Duster and Maruti Ertiga.
· Two wheelers: Sales declined 5% for the first time in the past three years even as inventory levels are high. Hero MotoCorp (HMC) is losing market share to Honda and Bajaj Auto (BAL) as it attempts to clear the inventory.
Commercial vehicles: Inventory correction underway
· MHCV (goods): Inventory correction is being driven by Tata Motors (TAMO) and Eicher Motors (EIH). Pace of decline has also slowed down. LCVs (goods): The segment continues to do well, benefitting from demand in rural areas and preference for hub-and-spoke model. Commercial vehicles (passenger): Sales have declined as demand from school segment has ebbed.
International business: JLR sales strong in US/UK
· JLR: Retail demand for JLR is strong in the US and UK. Premium car makers, Audi, BMW and Mercedes have seen higher MoM growth in the Chinese market.
Tata Motors is our top pick in the sector. Decline in HCV is bottoming out while demand for premium cars is still strong. Launch of new Range rover in Q3 is a near term positive.
Regards,
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