Chennai floods hit auto sales in December

Moneylife Digital Team 31 December 2015

Auto sales will be muted across segments during December, due to the Chennai floods. Sales of passenger vehicles will face the maximum impact, says Nomura

The floods in Chennai earlier in December would affect auto sales during the last month of 2015, says Nomura in a note.

"We expect subdued growth across segments as production was impacted by the Chennai floods. We expect maximum impact in passenger vehicles (PVs) followed by two wheelers (2Ws) and medium and heavy commercial vehicles (MHCVs). However, tractors are likely to continue strong double digit growth benefitting from a favourable base," it said in a research report.

In passenger vehicles, Nomura expects industry volumes to remain flat in December compared with same month last year. It sees, major players like Maruti Suzuki India Ltd (MSIL), Hyundai Motor India Ltd and Mahindra & Mahindra (MM) reporting low single digit growth during December 2015.

It said, "We expect MSIL to report about 6% growth in domestic volumes (on adverse base, 13% in December 2014), led by new launches like Baleno and S-Cross. We expect inventory levels to moderate as plants will be shut for maintenance from 28 December 2015 to 3 January 2016. Among unlisted original equipment manufacturers (OEMs), Hyundai, Renault-Nissan and Ford are likely to see only modest growth due to the impact of the Chennai floods. Others like Honda, General Motors and Toyota will likely see volume declines, in our view."

Talking about medium and heavy commercial vehicles (MHCVs), Nomura says it expect this segment to grow at 12% in December due to an adverse base. "In terms of OEMs, we expect Ashok Leyland (AL)’s volumes to increase by about 5%, impacted by the adverse base. While the company lost four-five days’ production because of the Chennai floods, we expect limited impact on wholesales due to higher inventory. We expect Tata Motors (TTMT)’ domestic volumes to rise by around 11% y-y and VE Commercial Vehicles Ltd (VECV)’s MHCV volumes to grow by about 20%," it added.

Nomura sees the two-wheeler segment to witness a growth of about 3% during December, mainly on weak demand from rural India. It said, "We estimate bike volumes to remain flat, while scooter volumes are likely to grow by about 8%. In terms of OEMs, we expect production loss of about 11,400 to 25,000 units for Royal Enfield (RE) and TVS Motor Company (TVS). Thus, overall volumes are likely to grow 17% and 4.5% for RE and TVS, respectively. Bajaj Auto is likely to report a modest 3.5% growth while we expect Hero MotoCorp Ltd (HMCL)’s overall volumes to decline by 1.5%. Honda Motorcycle and Scooter India, Pvt Ltd (HMSI) is likely to report a 9% decline".