EUR 120.00 For Business Accounts Only

MOSL: AUTOMOBILES-Diwali sales salvage festive season-2W/4W inventory reduces | No signs of recovery in CVs

Automobiles: Diwali sales salvage festive season; 2W/4W inventory reduces | No signs of recovery in CVs

 

Our interactions with leading PV/2W/CV channel partners indicate substantial demand improvement during Diwali, thus making up for the weakness witnessed during the Navratra festival. 2Ws and PVs have witnessed growth in low single-digits during Diwali. M&HCVs are yet to see a pick-up in momentum. Barring MHCVs, inventory correction has taken place across segments with inventory below 30 days post the festive season. However, sustenance of demand post the festive season is the key, considering the high consumer offers during the period. Oct'19 wholesales are on a high base as inventory build-up for Diwali (Nov-18) happened in Oct-18.

• 2Ws: The segment witnessed a sharp pick-up in demand this Diwali, particularly motorcycles in the entry/executive segment. This has resulted in inventory correcting back to <30 days. Royal Enfield also saw good spurt in demand, however, low inventory (~3 weeks) has resulted in stock-out situation in many key markets. We expect BJAUT wholesales to decline ~10% (~18% decline for domestic 2W volumes), while TVSL volumes are estimated to decline ~6% YoY. HMCL wholesales are estimated to decline ~9% and RE dispatches should decline ~5% YoY to 67k units.
• PVs: Substantial increase in discounts and aggression by public sector banks toward auto loans has boosted Diwali sales. Inventories post the festivities are less than 30 days. However, given the possibility of moderation in discounts by OEMs, dealers are not yet clear about sustainability of this recovery. MSIL's volumes are expected to decline ~2% YoY while M&M's UV (including pick-ups) volumes should decline ~12.5%. TTMT's PV volumes should decline ~37% (due to focus on inventory correction).
• CVs: There were no signs of recovery in the CV segment. However, continued production cuts by OEMs over the last few quarters have led to inventory correction (of ~30-35 days). We expect CV wholesales for both TTMT and AL to decline ~37% YoY (~49% decline for M&HCVs).