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Auto: Key drivers in 2011
Key Drivers:
Volume growth in FY12 robust across categories: We expect cars and 2Ws to grow between 12-15%, aided by
rising income levels, improving penetration and better financing environment. Even with increasing volumes,
there are negligible discounts being offered. M&HCVs are likely to grow at a slower pace of ~10-12% in FY12
(vs ~30% in FY11) due to the high base effect. Further, some of the YoY growth in CVs is due to stricter
adherence to over-loading norms in metros from Oct 10
We expect the trend of higher contribution from Tier 2/3 cities to continue in FY12 as well.
We expect the growth in passenger car exports to be robust at ~15-18% in FY12E, with newer global players
(such as Nissan, VW etc) making India their small car hub
With demand outpacing supply, most OEMs are running at full utilization levels and key models across cars and
scooters still have long waiting periods. Hence almost all OEMs are expanding their capacity.
Risks:
Rising input costs (aluminium, rubber, steel) to impact operating profitability across the board
Increasing competition (cars, 2Ws): OEMs are likely to have limited flexibility in effecting price increases
Currency movement (Yen - Maruti, Euro, GBP/USD – Tata Motors) will need to be monitored
Delay in GST implementation (4-6% savings in indirect taxes) would imply lower savings for consumers and
OEMs vs expectations. GST now likely to be implemented in 2012
Higher Interest costs are more likely to affect CVs vs cars (more secular demand driven) or 2w (low proportion
thru financing)
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