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MOSL: AUTOMOBILES: PV wholesales improve with easing of chip supplies; CV demand momentum sustains, delayed monsoons affect Tractors

Jun-22 sales of 2Ws and PVs were in line, while CVs were above and tractors were below our estimate. The sequential Improvement in PV wholesales reflects the easing of semiconductor shortages. Price hikes announced by OEMs from Jul’22 and the recent repo rate hikes may affect retail demand. Among 2Ws, volumes for HMCL and TVSL in Jun’22 were in line, while BJAUTO was above, and RE was below our estimate. 2W/PV/CV volumes grew 9%/23%/86% YoY in Jun’22; while the same for Tractors fell 15% YoY. 3W volumes remained flat YoY in Jun’22.

• 2Ws – In line, grew 9% YoY: Trend in wholesales indicates a slow recovery and continued impact of the semiconductor shortages affecting premium motorcycle sales. OEMs have announced price hikes from Jul’22, which may impact demand. As per our channel checks, dealer inventory stands at 30-45 days (from 60-75 days earlier). Volumes for BJAUTO/HMCL/TVSL/RE grew 2%/3%/ 23%/43% YoY.
• PVs – In line, grew 23% YoY: Healthy demand and easing of semiconductor shortages led to improved PV wholesales. This momentum is likely to continue with the launch of new models by OEMs. MSIL, MM (UVs including Pickups), and TTMT’s PV volumes grew 6%, 55%, and 87.5% YoY respectively.
• CVs – Above our estimate, grew 86% YoY: Both M&HCV and LCV volumes were above our estimate. M&HCV/LCV volumes grew 143%/52% YoY in Jun’22. Volumes for AL/TTMT/VECV grew 125%/69%/159% YoY in Jun’22.
• Tractors – Below our estimate, fell 15% YoY: Progression of monsoons will be the key factor driving Tractor demand. Tractor volumes for MM/ ESC fell 13%/ 20% YoY in Jun’22, as the delayed start of monsoon hurt demand.
• Key highlights from monthly volumes:
• TVSL: Premium 2Ws wholesales were affected due to semiconductor shortages. The management is working with alternate suppliers which resulted in a sequential improvement.
• Royal Enfield: Exports continued their upward trajectory, with Jun-22 exports of ~11k units were highest ever and grew 54% YoY. Exports contributed ~18% of volumes in Jun-22 (~16% in 1QFY23), albeit on low domestic volumes.
• MM indicated that sowing is lagging in the first fortnight of the season v/s the same period last year due to deficient rainfall in key Kharif states. Advancement of southwest monsoons across the country is likely to boost Tractor sales in coming months. UVs are seeing good traction, and the buzz around the new Scorpio N is likely to aid the growth momentum. Semiconductor shortages continue to remain dynamic.