India Autos: April volumes above expectations across segments
Moneylife Digital Team 03 May 2013

Nomura Equity Research believes that better April 2013 volumes could possibly be an initial sign of potential improvement in the demand environment, going ahead

Most of the Indian automobile manufacturers have reported their April 2013 sales numbers. Overall, volumes have been above expectations across all major segments (except utility vehicles), according to Nomura Equity Research in its Quick Note on the sector. UV volumes for Mahindra & Mahindra (M&M) were up 6% y-o-y as against the brokerage’s expectations of 15% growth. Even UV volumes for Toyota were weak, Nomura believes. Post 3% increase in excise duty for SUVs (in 2013-14 Budget), there were expectations of a roll-back of duty increases in April; this could have impacted volumes to some extent. One will have to wait for a few months to see if there is some slowdown in this segment, says Nomura.

 

Nomura believes that better April 2013 volumes could possibly be an initial sign of potential improvement in the demand environment going ahead. Petrol prices have been cut by Rs3 per litre (4%) a couple of days back; this should further help demand in passenger vehicle (PV) and possibly in two-wheeler segments as well, Nomura believes.

 

 

Car industry volumes declined 9% in April: Volumes in the car industry declined by around 9% y-o-y; better than Nomura’s estimates of 15% decline. On the other hand, Maruti Suzuki (MSIL) surprised positively with flattish domestic volumes (Nomura estimate: -6%) led by some improvement in petrol segment. MSIL’s market share was around 50% (around 46% in FY13).

 

Performance of other unlisted companies was mixed; Honda and General Motors have seen y-o-y growth while volumes of Ford and Toyota have seen sharp declines. Honda dispatched around 4,850 units of its newly launched Amaze sedan in April. Hyundai’s volumes have seen around 8% decline, but SAAR has improved from March 2013 levels and is indicating some growth in FY14F.

 

Two-wheeler segment records flattish volumes: According to Nomura’s analysts, two-wheeler industry volumes were flattish in April 2013 as compared to its estimate of 4%-5% decline. Bajaj Auto’s domestic volumes were above expectations (flat versus estimate of 5% decline) while Hero MotoCorp’s (HMCL) volumes were marginally below estimate. Honda Motorcycle & Scooters’ (HMSI) volumes were strong and increased by 30%; Nomura was expecting around 15% growth.

 

MHCV industry shows some improvement: Nomura estimates that the medium and heavy commercial vehicle (MHCV) industry volumes declined by around 5% in April 2013 as compared to 20%-40% decline seen over the last six months. The brokerage was expecting a 10% decline in April. Tata Motors’ volumes were above expectations (up 2%) while Ashok Leyland disappointed as volumes declined by 19% y-o-y (Nomura estimate: 12% decline). Eicher’s total CV volumes declined by 7% y-y.

 

Sharp improvement in tractor industry volumes: M&M’s tractor volumes increased by 38% y-o-y (Nomura estimate: 2% decline) in April 203. Tractor volumes of Escorts increased 43.6% y-o-y to 6,402 units. This could possibly be initial signs of revival in the tractor industry, Nomura believes.

 

The potential increase in government spending before elections will be positive for rural income and can have a positive impact on the tractor industry in FY14F. “We are currently building around 5% volume growth for M&M’s tractor volumes in FY14F; however, if this trend continues, we may even see strong double-digit tractor growth in FY14F,” said Nomura in its report.

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