FREE

MOSL: AUTOMOBILE | June-17 Sales Estimates-Destocking, postponement of demand to impact volumes

​AUTOMOBILE | June-17 Sales Estimates: Destocking, postponement of demand to impact volumes; Continuous shortage of BS-4 components to impact CV sales

2W and PV wholesale volumes are expected to remain weak due to destocking at dealer level and postponement of purchases by customers due to GST-related uncertainty. On the CV front, pre-buying, coupled with continued shortage of BS-4 components, is likely to impact sales.

Furthermore, our interaction with channel partners suggests that there is limited impact of GST on automobile dealers as (i) 100% excise reimbursement is available for vehicles and (ii) spare parts will be allowed to take input credit of 60%. Offers are higher due to GST rate-specific benefits in some models. Inventory levels are also low in the PV segment due to destocking by dealers.

Key highlights:

• ​Maruti Suzuki's domestic dispatches growth in Jun-17 is expected at ~13% YoY (on a low base due to fire at Subros factory last year). Our channel checks indicate destocking at dealer level with higher offers due to the difference in tax rates. Demand for Baleno, Brezza and New Dzire continues to remain robust as these models enjoy a healthy waiting period of 3-4 months. Inventory levels are as low as 10 days, with Ertiga and CIAZ facing stock-out situation due to higher sales of hybrid versions.
  
• Tata Motors' PV segment is expected to decline 17% YoY in Jun-17 due to de-stocking prior to GST implementation.
  
• In 2Ws, HMCL's volumes are expected to increase by only ~2% YoY (-11.7% MoM) due to weak retail off-take in key states. TVSL is likely to record ~4% YoY increase in volumes, led by strong growth in its scooters and motorcycles portfolio.
  
• Bajaj Auto's overall volumes are expected to decline ~2.8% YoY, led by a fall in domestic 2W and 3W volumes.
  
• We expect RE volumes to grow ~17.4% YoY to 59.5k units.