Automobile sector records significant slowdown in July 2019


#Analytical report by IndiaNivesh

Significant slowdown; hope on monsoon and government action 

While Maruti Suzuki reported lower than estimates (Actual ~109,300 vs Estimate ~121,000), most two wheelers – Hero MotoCorp, Bajaj Auto and TVS Motors reported in line with our estimates. Our recent channel check with Eicher Motors dealers highlighted a concern over Jawa considering it as a threat to RE and also the 650cc bikes has cannibalised its sales of 500cc bikes. In the tractor segment, Escorts and M&M reported in-line with our expectation of a declining sales volume trend of ~13% YoY and ~14% YoY, respectively. On the commercial vehicle side, Ashok Leyland reported a decline of 39% in M&HCV, Tata reported a decline of 45% YoY in its M&HCV sales. Overall, we continue to have a contrarian BUY on Hero MotoCorp, Bajaj Auto and TVS Motors. Maruti and Escorts are attractively valued. We remain positive on the CV recovery cycle and continue to recommend BUY on Ashok Leyland.

Maruti Suzuki sold 109,264 vehicles in Jul’19 decline by ~14% vs our expectation of 121,000. Exports de-grew by ~9% YoY at 9,258 units. The passenger car segment de-grew ~35% YoY Utility vehicles de-grew by ~38% YoY. Omni has been discontinued which impacted the volume of Vans registering a 38% de-growth YoY.

M&M’s auto sales stood at ~40,100 units, decline of ~15% YoY against our expectation of 38,800 units. Its tractor sales registered de-growth of ~12% YoY by selling 19,992 units against our expectation of 19,000 units.

Tata Motors’ sales volumes de-grew by ~36% YoY.   It reported ~45% YoY de-growth in its domestic M&HCV sales. Its LCV de-grew by ~28% YoY and PV de-grew by ~39%. Exports were hit by ~32%. Overall, the company reported a volume sale of ~38,300 units against our expectation of 46,000 units.

Ashok Leyland reported its monthly total sales at ~10,900 units against our expectation of 11,700 units. M&HCV segment reported de-growth of ~39% YoY while the LCV segment was flat YoY.

Hero MotoCorp reported two-wheeler sales at ~5,35,800 units, registering a de-growth of ~21% YoY against our expectation of 5,60,000 units.

Bajaj Auto reported in-line with our expectations; the motorcycle segment de-grew ~3% YoY, reporting volume sale of ~3,22,200 units against our expectation of 3,15,000 units. Three-wheelers sales reported at ~59,300 units, down ~13% YoY against our expectation of 55,000 units.

TVS Motors reported sales volume at ~265,700 two-wheelers, down ~14% YoY against our expectation of 262,000. Motorcycle sales de-grew by ~11% YoY, scooter sales de-grew by ~12% YoY and moped sales de-grew ~23% YoY. Three-wheeler sales reported 4% YoY growth to 13,786 units. Overall sales de-grew by ~13% 279,500 units vs our expectation of 275,000 units.

Eicher Motor reported sales volume of 54,200 units, ~22% YoY decline against our expectation of 58,000 units. The 350cc above segment reported a 71% volume growth on the successful launch of the 650cc twins – Interceptor 650, Continental GT, on the contrary 350cc segment reported a de-growth of ~29%.

Escorts reported de-growth of ~13% with tractor volumes of 4,860 units against our expectation of 5,200 units. Atul Auto sold 3,272 units, down ~15% YoY vs our expectation of 3,600.