MOSL: AUTOMOBILE | Oct-17 Sales Estimates-Wholesales to be mixed bag on high base of previous year-Positive rural sentiment

​AUTOMOBILE | Oct-17 Sales Estimates: Wholesales to be mixed bag on high base of previous year; Positive rural sentiment and new products to continue driving rural sales

Our channel checks indicate healthy retail growth in the 2W and PV (+15-18%) segments, led by improving demand from the urban and rural markets. Retail demand is showing healthy growth, with rising offtake from customers in key markets. With average growth of 16-18% in retails, 2W OEMs have ended the festive season on an encouraging note. PVs, led by MSIL, also witnessed healthy retail sales growth of 13-15%.

Rural demand has exhibited healthy growth, driven by an improvement in rural sentiment on the back of a well-spread monsoon season and increased farm income (led by better crop realizations). However, on the back of a higher base (Oct-16 - a festive period), wholesales for Oct-17 are expected to be mixed: MSIL, TTMT, BJAUT, AL and EIM to report growth; TVSL and HMCL to report flat sales; MM volumes to decline ~12.3%.

Key highlights:

• Maruti Suzuki's domestic dispatches are expected to grow 12.7% YoY. Demand for Baleno, Brezza and New Dzire remains robust, as these models enjoy a healthy waiting period. Within the domestic portfolio, CIAZ sales are expected to be weak (-24.5% YoY) due to the GST impact on hybrid cars, while strong growth is expected in the compact segment (+30% YoY), led by the new Dzire.
  
• Tata Motor's PV segment is expected to grow 1.5% YoY, led by inventory build-up of its first compact SUV Nexon. CV segment is expected to grow 4.1% YoY, led by a 7.7% increase in LCV sales, while M&HCV sales are expected to grow 2.4% YoY.
  
• MM's volumes are expected to decline 12.3% YoY, as tractors, UV and 3W volumes are likely to decline 11.5%, 13.7% and 15.7%, respectively.
  
• In the 2W segment, BJAUT is expected to report 6% YoY growth, led by a recovery in exports. TVSL and HMCL sales are expected to increase 0.6% YoY and -1.2% YoY, respectively.