Automobiles: Passenger vehicle volumes recover in December 2014::Kotak Sec report

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Passenger vehicle volumes recover in December 2014. Passenger vehicle
manufacturers reported strong sales in December 2014 with Maruti, Hyundai, Tata
Motors and Mahindra posting better-than-expected growth. Two-wheeler volumes
were subdued with Hero reporting flat yoy growth while TVS continued to report
strong growth. However, UV sales disappointed for both Tata Motors and M&M.
Recovery in MHCVs continued with Tata Motors posting strong growth.

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Two-wheelers continue on growth trajectory as scooter sales shine
Hero Motocorp reported subdued volume growth (flat yoy) in December 2014. We believe the
company’s sales will pick up in 4QFY15 during the wedding season. The company’s scooter
capacity will also increase from 80,000 units/month currently to 100,000 units/month by
January 2015. Bajaj Auto reported a 3% yoy decline in total volumes led by 16% yoy decline in
domestic volumes partially offset by 10% yoy increase in export volumes.
Among others, TVS Motors reported sharp volume growth (+20% yoy) led by strong demand
for its scooters (+25% yoy) and 19% yoy growth in two-wheelers exports while Royal Enfield
continues on its growth trajectory posting 48% yoy increase in domestic sales volumes.
Maruti Suzuki reports 13% yoy increase in domestic sales led by compact cars segment
Maruti Suzuki reported a 13% yoy increase in domestic sales volume in December 2014 led by
(1) a sharp 25% yoy increase in the Swift-Celerio-Ritz segment, (2) 30% yoy growth in the
Omni and Eeco segment and (3) 12% growth in the utility vehicles segment. Export volumes
continued to rise, registering a sharp 171% yoy increase in December 2014. Total sales volume
grew by 20.8% yoy, aided by strong export and domestic volumes. We expect the company to
grow at 5% yoy through the rest of the fiscal year. Maruti Suzuki indicated that retail volumes
grew by 18% yoy in December 2014, which led to reduction in dealer inventory levels to two
weeks. Among other car manufacturers, Hyundai reported a sharp 15% yoy increase in
domestic sales, Toyota Kirloskar reported a 10% yoy domestic sales growth and Honda Cars
reported 163% yoy growth in December 2014.
M&M passenger UV sales volumes increase 5% yoy; tractor volumes continue to disappoint
M&M reported a 14% yoy decline in total sales in December 2014 led by (1) 27% yoy decline in
tractor volumes and (2) 15% yoy decline in pick-up volumes, which was partially offset by a 5%
yoy growth in passenger vehicles volumes. Tractor volumes have continued to disappoint in the
quarter and we expect M&M sales volumes to remain subdued for the rest of the fiscal year
despite a decent response to the new Scorpio. Absence of new model launches in the UV/SUV
segment for the next few months is likely to impact the company’s competitive positioning even
as it gears up for the launch of compact SUVs towards the latter half of CY2015.
MHCV volumes report strong growth for Tata Motors; passenger car volumes rise 53% yoy
Tata Motors reported a 10% yoy growth in total sales volume led by (1) 62% yoy growth in
domestic MHCV sales and (2) 53% yoy growth in the passenger car segment led by strong Zest
and Nano sales. However, light commercial vehicle (LCV) sales continue on its downward
trajectory with a decline of 26% yoy in the domestic market while UV volumes also declined by
24% yoy.

LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05012015au.pdf