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MOSL: AUTOMOBILES-High inventory, production cuts to impact March sales; Retail demand weak across segments

Automobiles: High inventory, production cuts to impact March sales; Retail demand weak across segments

 

Our interaction with leading PV/2W/CV channel partners and suppliers indicates weak demand trends for the third consecutive month now. While PV demand is partially supported by new launches, CV demand has been declining over the past two months due to weak demand from major end-user segments.    

• PVs: Demand trend in the key western, central and northern markets such as Maharashtra, Gujarat, Delhi and MP remains weak, leading to continued high inventory levels across OEMs. We expect MSIL's total dispatches to decline 11.5% YoY in Mar'19.
• 2Ws: Post the gloom in Jan/Feb'19, key channel partners are indicating weak retails across key markets (average decline of 12-15%) this month too. Stock levels remain high at ~60-65 days. We expect wholesales to grow 12% for BJAUT, but decline 24%/7% YoY for HMCL/TVSL.
• CVs: Demand remains muted due to weak trends in major end-user segments in the key western, southern and northern markets. Demand for tippers (infrastructure) is also slowing due to non-release of funds by state governments due to the upcoming general elections. This has resulted in high average discount per unit. We expect CV wholesales for AL/TTMT to decline by 4.7%/9.6% YoY.