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MOSL: AUTOMOBILES: PV sales to pick-up on order book and low inventory

AUTOMOBILES: PV sales to pick-up on order book and low inventory

 

• Jun’21 was the first month post the lifting of state-wise lockdowns, with a number of markets open in varying proportion during the month. Enquiry levels for PVs and Tractors have improved faster than others, but were still below Jan-Feb’21 levels for PVs. Demand for 2Ws has been affected since rural demand is still not forthcoming, unlike after the first wave, where rural areas were relatively less affected.
• Our interaction with leading industry channel partners reflects a mixed sentiment of optimism and uncertainty. 2W volumes are expected to remain weak, while PV demand is expected to recover faster on the back of personal mobility preference, supported by low inventory (10-20 days). M&HCVs demand is expected to recover towards the end of 2QFY22 as the Infrastructure/Cargo segment is seasonally slow due to monsoons/low freight availability. Tractor demand continues to remain robust on a strong Rabi harvest from the Agriculture side, while the Commercial side continues to lag.
• Considering the impact of COVID-19 in both a YoY and MoM comparison, we compare Jun’21 with Jun’19. In Jun’21, 2W wholesale volumes are estimated to decline at a two-year CAGR of 17.5%, CVs by ~36% (LCVs/M&HCVs by ~34%/~38.5%), and 3Ws by ~17%. PVs (+6% CAGR) and Tractors (+6% CAGR) are the only segments where volumes are higher than Jun’19 levels.
• 2Ws are the worst impacted as the second COVID wave has affected rural and semi-urban markets. Rising fuel prices has further acted as a dampener to demand. Inquiry levels have not picked up as was expected in Jun’21. HMCL is taking another price hike in Jul’21 due to commodity cost inflation, and other players are expected to follow suit. Inventory in the system stands at 45-60 days. We expect wholesales for BJAUT’s 2Ws to decline by 6% CAGR, TVSL by ~12% CAGR (both supported by exports), HMCL by ~28.5%, and RE by 11.5%.