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MOSL: AUTOMOBILES-Gradually coming out of new axle norm overhang-PVs/2Ws enter the slow lane amid Kerala floods

Automobiles: Gradually coming out of new axle norm overhang; PVs/2Ws enter the slow lane amid Kerala floods

 

• Our interaction with leading channel partners indicates that the initial impact from the new axle norms on CV retails is gradually subsiding. However, large fleet operators, in some cases, are still holding back their purchase decisions due to prevalence of vehicle registration issues around the new axle norms. Separately, 2W and PV retails have been impacted by as much as 50% across OEMs post Kerala floods (the impact is particularly acute in central Kerala regions).
• CVs: Retail demand is gradually recovering as clarity emerges around the implementation of the new axle norms. However, large fleet operators, in some markets, are still delaying their purchase decisions as mentioned earlier. This has resulted in inventory levels of ~35-40 days. Discounts per unit have remained stable sequentially. We expect CV wholesales for AL and TTMT to grow 18% YoY and 21% YoY, respectively, in Aug-18.
• 2Ws: Demand momentum remains steady (ex-Kerala), with retail sales growth of 8-10% in key rural markets. Inventories across major OEMs have increased to ~5 weeks (v/s 4 weeks earlier). Bajaj and TVSL's wholesales are expected to grow by ~19% YoY and 5% YoY, respectively. On the other hand, HMCL's wholesales are likely to decline by 0.6% YoY.
• PVs: MSIL is witnessing retail growth of ~8-10% in key rural markets, while its sales growth in urban markets remains at 6-7%. MM, too, is witnessing retail growth of 7-8%, led by healthy demand from rural markets.