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MOSL: AUTOMOBILES-Recovery still elusive-Inventory correction a priority; Volume base for PVs normalizes

AUTOMOBILES: Recovery still elusive; Inventory correction a priority; Volume base for PVs normalizes, but over 20% decline still expected

 

Our interaction with leading PV/2W/CV channel partners still indicates no sign of demand recovery at the retail level, even as inquiries to sales remain tepid. The production cut since Mar'19 has been lagging the decline in retail, resulting in higher inventory levels. 

• 2Ws: Despite the production cut, inventory remained high due to weak demand. We expect BJAUT wholesales to decline ~3% (~1% growth for 2W volumes). According to our estimates, TVSL volumes should decline ~8% YoY, HMCL's wholesales should skid ~11% YoY and RE dispatches should decline ~17.5% YoY to 57k units.
• The PV demand trend has been weak across major markets with inquiries to sales conversion remaining weak for existing models. The average inventory levels for MSIL/TTMT are at 30-35 days, while for MM, it remains higher at 35-40 days. MSIL's volumes should decline ~25%, whereas MM's UV (incl. pick-ups) volumes are expected to drop ~11%. TTMT's PV volumes should decline ~29%.
• CV retails too were weak across regions as demand from all major end-user segments remained tepid. This resulted in the average discount per unit inching up further. We expect CV wholesales for AL to decline ~20% (~27% decline for M&HCVs), while TTMT's CV wholesales should decline 19% YoY due to continued inventory correction.