MOSL: AUTOMOBILE-PVs and 2Ws to see healthy dispatch growth-HCVs to see gradual retail recovery from 2QFY18

​AUTOMOBILE: PVs and 2Ws to see healthy dispatch growth; HCVs to see gradual retail recovery from 2QFY18 onwards

2W and PV wholesale volumes are expected to be healthy, led by (i) inventory build-up to meet festive demand and (ii) gradually improving retails with well-spread monsoon boosting rural sentiment. Growth in CV segment will be largely led by LCVs/ICVs.

Our interaction with mass market 2W channel partners indicates healthy retail growth led by strong retail demand from key states. Factors such as good monsoon and better crop realizations have lifted sentiment in rural/semi-urban areas. Pre-festive demand is evident in states like Maharashtra and Gujarat.

Key highlights

Maruti Suzuki’s domestic dispatch growth is expected at 25% YoY. Demand for Baleno, Brezza and New Dzire continues to remain robust, as these models enjoy a healthy waiting period of 3-4 months. Within the domestic portfolio, CIAZ sales are expected to be weak due to GST-led impact on hybrid cars, which form ~60% of overall sales.

Tata Motors’ PV segment is expected to grow by 12% YoY and CV segment by 8% YoY (led by an increase of 12% in LCV sales and 3% YoY in M&HCV sales).

MM’s volumes are expected to rise 12% YoY, as tractors volumes are expected to increase by 22% YoY and UV volumes by 11% YoY. However, 3W sales are expected to decline 10% YoY.

In the 2W segment, HMCL and TVSL wholesales are expected to increase at a healthy 12% and 9%, respectively, led by improving retails in key states and inventory build-up to meet festive demand. BJAUT is likely to record sales of 3.6% YoY due to weak 3W and exports sales.

We expect RE volumes to grow 17.5% YoY to 65.5k units. With commissioning of 3rd plant in last week of August, we expect gradual ramp-up from 2HFY18 onwards.