Auto Sector Performance - July'20 - Angel Broking

Mr. Rajit Rajoriya, Equity Research Associate, Angel Broking Ltd.

July 20 Auto Sales Number -2 Wheelers

Demand for Entry level 2-Wheeler space witnessing recovery at encouraging pace due to low ticket size and personal mobility preferences. Hero Motocorp out-performed the 2Wheeler space with the de-growth of 4%, whereas TVS motors sales numbers dropped 9.6%, Royal Enfield saw a fall of 25.6%, Bajaj Auto sales figure dropped 26%.

Demand for the 2W segment is picking up with a good pace among broader auto space but owing to the pandemic and lockdowns, operation of the companies are still getting affected resulting in lower capacity utilizations.

July 20 Auto Sales Number - Passenger Vehicles

On account of good pent up demand, Maruti Suzuki, India's leading car manufacturer, witnessed mere -1.1% decline in July month auto sales number after reporting 0 sales in April, 86% decline in May, 54% decline in June. Passenger car sales de-grew by 2% on the other hand Utility vehicle registered a robust 26.4% growth in July month YoY basis.

Mahindra's Utility vehicle sales number fell by 34% on YoY basis. Hyundai Motor also reported a sales number with a decline of 2.1% in Passenger car and Utility vehicles combined.

Car segment being discretionary in nature will see slow recovery owing to the pandemic given the lowered income levels across the classes and poor sentiments of consumers.

July 20 Auto Sales Number - Tractor

Tractor segment outperformed the broader auto with Mahindra Tractor registered growth of 27% on a YoY basis. Escorts reported 9.5% growth in tractor sales in July month owing to low level production level due to supply chain issues. India's Agro activities saw negligible impact due to Covid pandemic resulting in minuscule dent in farmer's income and sentiments.

Demand for the Tractor segment will continue to remain buoyant in coming times.

July Auto Sales Number - CV

Commercial vehicle segment is the worst hit segment in the auto space due to covid pandemic. This segment was already suffering from economic slowdown past year.

Ashok leyland reported 46% fall in July sales on a YoY basis and Eicher Motors Volvo segment reported 56% fall in sales numbers. However LCV is witnessing fast recovery in comparison to MHCV.

Source : Equity Bulls

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