Auto Sales to remain low in March; Maruti Suzuki likely to outperform industry growth
Moneylife Digital Team 29 March 2013

Automobile companies are offering discounts and low interest rate schemes to increase sales volumes but growth remains very weak

Customer footfalls and conversion rates have remained quite low in the Indian automobile industry. Although automakers are offering discounts and low interest rate schemes to increase sales volumes, overall growth remains very weak, says Nomura Equity Research.


Nomura says it believes that Maruti Suzuki India Ltd (MSIL) will continue to outperform industry growth, led by a strong order book for its Swift and D’zire models and strong distribution network in rural India where demand is still good. Overall, it is expected that MSIL’s domestic car volumes may decline by around 13% in March 2013 compared to a 22%-24% decline expected for the industry. MSIL’s market share will remain around 50% in this month, as well.


According to Nomura research, volumes in the medium and heavy commercial vehicles (MHCV) segment are likely to decline by 30% and two-wheeler volumes are likely to decline by around 2% year-on-year during March 2013.


While retail demand remains weak across segments, year-on-year growth in sales volumes this month could also be impacted by the high base of last year due to pre-buying ahead of an expectation of increase in excise duty. Thus, there could be negative surprises, it said.


In the two-wheeler segment, it is expected that industry volumes are likely to decline by around 2% year-on-year. Volume growth at Honda Motorcycles should be around 8%, as per Nomura’s estimates. Bajaj Auto and Hero MotoCorp are likely to see 10% and 3% declines in domestic volumes, respectively.


Nomura expects Tata Motors and Ashok Leyland’s sales volumes in the MHCV segment to decline by 35% and 25%, respectively. Even volumes of Eicher will be weak and decline by around 20% year-on-year.


For Mahindra & Mahindra (M&M), it is expected that there will be 16% volume growth in the utility vehicles (UV) segment led by its Quanto model. Recovery in the tractor industry might take some more time and expect a 5% volume decline for the company in this segment in March 2013. 


“We reiterate our preference for companies where there is visibility of earnings growth and valuations are reasonable relative to historical averages. MSIL and M&M remain our top picks in the sector,”  Nomura added.

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