Auto Compass - September: A dull month:: Edel

UVs and LCVs were the brighter spots in an otherwise lackluster September. Retail sales remained weak and OEMs did not look aggressive enough for half yearly sales push. Two-wheeler sales disappointed in a big way thanks to Hero Motocorp (HMCL). All major car makers except Maruti (MSIL) saw a decline ahead of the festive season due to overall weak sentiment. Weakness in MHCV (GC) continued whereas LCV (GC) remained healthy. Inventory levels for two wheelers and MHCV were up due to weak sales. However, inventory levels declined for cars. SIAM, in its periodic review, cut the industry growth rates across segments.

�� -->

‘Auto Compass’ is our monthly review of the auto sector, detailing prevailing trends across segments and sub-segments in the sector.

Personal vehicles: UVs drive growth

·       Cars: All major car makers except Maruti reported a YoY decline in sales. Retail sales remained weak for Maruti as well with a sale of 70k units versus dispatches of 94k units. Inventory correction was a positive for industry and should help during the festive season with new launches. UV segment continued with its growth momentum (up 50% YoY) supported by new launches (Duster, Ertiga etc)

·       Two wheelers: Sales declined ~13% with inventory levels increase. Ex-HMCL, the decline was much lower at ~3%. HMCL continued losing market share (~45%) to Bajaj and Honda. Inventory remained at higher level.

Commercial vehicles: Weakness continues in MHCV

·       MHCV (goods): Inventory which saw correction last month increased again mainly due to Tata Motors (TATA) though Ashok Leyland’s performance was encouraging with market share gain along with inventory correction. LCVs (goods) continued to do well, benefitting from demand in rural areas and preference for hub-and-spoke model.

·      

International business: JLR sales strong in US, UK

·       JLR: Retail demand for Land Rover products remained strong in US and UK. Other premium car makers also saw increase in global sales led by US, China and UK.

Tata Motors and Ashok Leyland are our top picks in the sector. Decline in HCV is bottoming out while demand for premium cars is still strong. News launches are near term positive for JLR whereas market share gain and inventory corrections augur well for Ashok Leyland.

Auto Compass - September: A dull month

Regards,