FREE

MOSL: AUTOMOBILES-CV demand weakening, though low base supporting growth

Automobiles: CV demand weakening, though low base supporting growth; 2W, PV retails still weak post muted Navratri festive demand

 

Our interaction with leading PV/2W channel partners indicates only a marginal improvement in demand momentum, leading to high inventory levels. Retails were already weak in key markets, with the 15-20% decline in Navratri festival demand adding fuel to the fire. We note that front-loaded insurance cost, rising fuel prices and low crop realizations are influencing buying decisions in the 2W/PV/tractors segments. CV demand, too, is seen weakening in Oct-18 (bucking the healthy growth trend), largely because of liquidity issues in key end-user industries.  

• CVs: Demand has weakened abruptly in Oct-18 on account of liquidity pressures from customers to fleet operators, and deferral in purchase due to constraints in vehicle financing. However, a low base has helped the segment grow by 20-25% YoY (-15-20% MoM). We note that inventory level is high at 35-40 days. This has resulted in higher discounting coming back in CVs, reversing the stable discounting trend. We expect CV wholesales for AL and TTMT to grow by 24% YoY and 27% YoY, respectively.
• 2Ws: Post weak retails during the Navratri festival, key channel partners are indicating a gradual increase in footfalls. However, inquiries to conversion remain low, leading to high inventory in key markets. We, nevertheless, expect BJAUT, HMCL and TVSL wholesales to grow by 25%, 12.5% and 25% YoY, supported by a low base (timing difference in the festive period vis-à-vis last year).