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MOSL: AUTOMOBILES-Structural shift toward scooters and SUVs continues-The big getting bigger

​Automobiles: Structural shift toward scooters and SUVs continues; The big getting bigger – category leaders reinforce their dominance

• Demonetization puts brakes on growth of passenger cars and motorcycles.
  
• Value continues to migrate toward scooters and SUVs, driven by changing customer preferences.
  
• Uptrading in 2Ws/4Ws continues, as reflected in the increasing share of premium motorcycles and PVs priced more than ~INR800k.
  
• Category leaders getting stronger as competition hurts second/third ranked players more.
  
• We took a deep dive into granular data on the Indian 2W/PV industry, observing continuance of bigger trends in FY17, along with increased dominance of category leaders in both 2W and 4Ws. While demonetization had stalled a revival, there are early signs of a 2W export market recovery. Key highlights:
  
• Demonetization puts brakes on recovery, especially of 2Ws
  
• Demonetization had stalled the recovery in the auto sector, primarily impacting the 2W segment due to its higher exposure to the rural market and lower financing penetration. Between November 2016 and March 2017, while PV volume growth slowed to 6% (v/s +11% over Apr-Oct 2016), 2W volumes fell 6% (v/s +16% over Apr-Oct 2016). However, we note that normalcy has been restored in PVs (volumes up ~10% in March 2017) and 2Ws have recovered to record flat YoY growth.