Automobile Sector - Auto Sales January Month Report

 Mixed Performance with Strong CVs and Tractors…but Subdued 2Ws 

Key Findings: 

• Overall Auto sale delivered mixed performance within Auto segments, supported by strong urban sales but slower rural recovery. Infra activities pick up helped CVs, while tractor segment surprised with strong double-digit growth during the month. However, 2Ws remained subdued. PVs also recorded healthy volume. Seasonally industry witness's slowdown due to inauspicious period during first fifteen days of January, while it picks up in second half.

• PV segment witnessed decent performance due to success of new launches, but semiconductor supply impacted production to some extent. 2W segment witnessed highly subdued performance with flat to decline on YoY as well as MoM basis. On the other hand, 3W segments recorded healthy double-digit growth of 100% YoY.>

• Channel check suggests that overall sales is picking up slowly in rural markets due to partial rural recovery amid better rabi sowing led improved sentiment. Within segments, M&HCV, 3Ws and Tractor are strong performers.

Key Highlights: 

Indian automobile companies witnessed gradual improvement in sales performance on YoY as well as MoM. Better Rabi sowing supported Tractor segment, while pick up in construction activities with new infra projects aided CV sales. High inflation and economic challenges impacted rural economy and 2W sales. Low base and normalized school & college activities fueled Buses and 3W sales. Tractor sales performance was big surprise as it recorded healthy double-digit YoY growth, despite slow rural recovery.

Our View

The industry volume to see marginal improvement but would remain under pressure in near term. Despite stronger 1H on a low base, ongoing global geopolitical issues and depreciating currency continue to keep pressure on economies and elevating inflation level across countries. This has been limiting industry wide recovery at the moment. However, softening commodity prices and lower fuel prices would support industry ahead on volumes and margins front. Industry recovery is much slower than expected, particularly for 2Ws, which we expect to continue pressure on 2Ws for next 1 quarter. We expect automobile industry to witness double-digit growth in FY23, while we expect M&HCV segment to outperform with 40%+ volume growth in FY23. Nonetheless, long-term fundamentals continue to remain intact for automobile sector, in our view.

• 2W: BAL’s sales de-grew by 21% YoY (up 2% MoM) to 2,85,995 units, HMCL’s sales de-grew by 6% YoY (down 10% MoM) to 3,56,690 units. TVSL’s sales grew by 3% YoY (up 14% MoM) to 2,75,115 units.

• PV & CV: M&M’s auto volume grew by 37% YoY (up 14% MoM) to 64,335 units, while MSIL’s volume grew by 12% YoY (up 24% MoM) to 1,72,535 units. AL’s volume grew by 23% YoY (down 5% MoM) to 17,200 units and TTMT reported sales of 81,069 units (up 6% YoY and up 9% MoM).

• Tractor: M&M’s tractor volume grew by 28% YoY (up 25% MoM) to 28,926 units and Escorts Kubota’s sales volume grew by 17% YoY (up 19% MoM) to 6,649 units.

Two-wheeler Segment 

Bajaj Auto: Bajaj Auto (BJAUT.IN) sold 2,85,995 units in Jan’23 (down 21% YoY and up 2% MoM), primarily due to highly subdued export volumes. Its domestic sales grew by 16% YoY (up 17% MoM) to 1,73,270 units, as domestic 2W sales grew by 4% YoY (up 12% MoM) while domestic 3W sales grew by strong 132% YoY (up 43% MoM). Its exports performance was highly subdued at a two and half year's low level with decline of 47% YoY (down 15% MoM) to 1,12,725 units. Its 2W exports de-grew by 46% YoY while 3W exports de-grew 53% YoY, respectively. We expect company’s exports to continue to remain under pressure over next 1-2 months and it would record double digit decline in FY23E.

Hero MotoCorp: Hero MotoCorp (HMCL.IN) sold 3,56,690 units in Jan’23 (down 6% YoY and down 10% MoM). Motorcycle volume decreased by 7% YoY (down 7% MoM), while scooter sales grew by 2% YoY (down 38% MoM). Pause on improvement in rural sentiment and sharp price increase over last 1-2 years. We expect 2W recovery to take some more time and low base, pent up demand, softening in commodity prices would support demand gradually in next 6 months.

TVS Motor: TVS Motor (TVSL.IN) sold 2,75,115 units in Jan’23 (up 3% YoY and up 14% MoM). Its 3W sales decreased by 18% YoY (down 28% MoM) to 10,405 units, while 2W sales grew by 4% YoY (up 16% MoM) to 2,64,710 units. Its motorcycle volume de-grew by 12% YoY (down 3% MoM) to 1,21,042 units, while moped sales grew by 3% YoY (up 42% MoM) to 37,131 units. Two-wheeler exports degrew by 44% YoY (down 27% MoM) to 48,239 units, while the company’s total exports volume degrew by 42% YoY (down 28% MoM) to 57,024 units in Jan’23.

Four-wheeler Segment

Maruti Suzuki: Maruti Suzuki’s (MSIL.IN) volume increased by 12% YoY (up 24% MoM) to 1,72,535 units. In domestic PV segment, its sales increased by 14% YoY (up 32% MoM) to 1,47,348 units. Its total exports de-grew by 3% YoY (down 20% MoM) to 17,393 units. While the UV volume grew by strong 33% YoY (up 7% MoM) to 35,353 units, van volume grew by 11% YoY (up 11% MoM) to 11,709 units. Mini segment (Alto and S-Presso) sales volume increased by 37% YoY (up 161% MoM) to 25,446 units. Its volume in compact segment (Baleno, Celerio, Dzire, Ignis, Swift, Tour S, Wagon R) grew by 3% YoY (up 28% MoM) to 73,840 units.

Mahindra & Mahindra (M&M): M&M’s (MM.IN) combined volume (Auto + Tractor) came in at 93,261 units (up 34% YoY and up 17% MoM). Its auto volume (domestic + exports) grew by 37% YoY (up 14% MoM) to 64,335 units. It sold 61,326 units in domestic markets (up 40% YoY and up 15% MoM), while exports grew by 5% YoY (down 3% MoM) to 3,009 units. Its key volume contributor i.e. PV segment – comprising of UV, MPV and PCs – grew by strong 66% YoY (up 16% MoM), supported by strong order book of newly launched XUV700 and Scorpio-N. Its LCV sales grew by 1% YoY (up 8% MoM) to 20,776 units, while tractor sales grew by 28% YoY (up 25% MoM) to 28,926 units. Domestic tractor volume stood at 27,626 units (up 31% YoY and up 28% MoM), while export volume de-grew by 15% YoY (down 19% MoM) to 1,300 units.

Tata Motors: Tata Motors (TTMT.IN) sold total 81,069 units (up 6% YoY and up 9% MoM) in Jan’23. Its domestic CV volume stood at 31,694 units (flat YoY and down 4%- MoM). Its domestic PV volume stood at 48,289 units (up 18% YoY and up 20% MoM) on the back of success of new launches and improved brand equity. Its total domestic volume grew by 10% YoY (up 9% MoM) to 79,983 units in Jan’23.

Ashok Leyland: Ashok Leyland (AL.IN) sold 17,200 units in Jan’23 (up 23% YoY and down 5% MoM). Its LCV sales stood at 6,090 units (up 18% YoY and up 7% MoM), while M&HCV volume grew by 34% YoY (down 11% MoM) to 10,108 units, mainly due to 28% YoY growth (down 9% MoM) in Truck segment and 133% YoY growth (down 26% MoM) in Bus segment. Despite the near-term hiccups, we believe the CV industry would continue its up cycle over next 1-1.5 years. Pick-up in construction activities and infra projects have started helping the CV segment. Moreover, bus segment has started witnessing strong recovery recently and it would see further strong improvement as schools and colleges started functioning normally. Its outperformance viz-a-viz peers clearly indicates market share gain by AL.

Eicher Motor: Eicher (EIM.IN) sold 7,181 units in Jan’23 (up 32% YoY and down 1% MoM). While the company sold 6,791 trucks and buses (up 50% YoY and up 2% MoM) in the domestic markets, it exported 201 vehicles (down 75% YoY and down 40% MoM) during the month. Volvo truck volume increased by 73% YoY (down 13% MoM) to 189 units.

Tractor Segment 

Escorts: Escorts (ESC.IN) sold 6,649 units (up 17% YoY and up 19% MoM). Its domestic volume grew by 22% YoY (up 25% MoM) to 6,235 units, while exports de-grew by 32% YoY (down 30% MoM) to 414 units. Company’s market share gain continues in the month.