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MOSL: AUTOMOBILES-Retails moderate across PV, 2W segments

AUTOMOBILES: Retails moderate across PV, 2W segments; Inventory levels increase, partly due to onset of festive season

 

Our interaction with leading channel partners indicates moderation in retails across segments. Rain deficiency in key markets like Bihar (-21%), Haryana (-22%), UP (-9%) and Gujarat (-27%) is impacting rural incomes, and in turn, retails. The need for upfront payment of insurance cost, the inauspicious ‘Shradh’ period and rising fuel costs, too, impacted buying decisions in rural areas. In CVs, demand remains healthy, though a shift to lower-tonnage vehicles is visible.

• CVs: Demand in key markets remains healthy, but the shift to lower-tonnage vehicles has accelerated sequentially owing to the implementation of new axle norms. While healthy freight availability continues driving new CV demand from both large and small fleet operators, higher diesel prices and the commensurate lag in freight rate increase are impacting buying decisions. We note of high inventory level of up to 45 days. Ashok Leyland (AL) has taken a price increase of 1-1.5% across segments. We expect CV wholesales for AL and Tata Motors (TTMT) to grow by 22% YoY and 21% YoY, respectively, in Sep-18.
• 2Ws: Demand momentum in 2Ws is mixed. Retail sales growth has moderated to 6-8% from 8-10% earlier, as rain deficiency in key markets and the need to make upfront payment of insurance cost are impacting buyer sentiment. We expect BJAUT, HMCL and TVSL wholesales to grow 5.5%, 1.3% and 2.3%, respectively, in Sep-18.