Automobile Sector - Monthly Quick View - Nov' 20 - Higher YoY Volume on Festive Sales; MoM Volume Declines - Reliance Securities

As per the Society of Indian Automobile Manufacturers (SIAM), domestic auto sales volume (excluding CVs) grew by 11% YoY (down 20% MoM) to 19,09,372 units in Nov'20. Though retail sales volume is expected to have been higher due to Diwali festival, inventory destocking resulted in lower wholesale volume. Overall inventory level across segments fell by 1-2 weeks, which is close to the normal level. Just concluded festival season witnessed decent traction with decent off-take and booking for new models (particularly for 2Ws and PVs). However, post-festive sales need to be seen over the next 2-3 months to judge the industry trend over near-to-medium-term. From long-term perspective, sector remains structurally strong due to low penetration and improving affordability.

PV Segment: Overall PV volume grew by 13% YoY (down 8% MoM) due to 11% YoY and 8% YoY growth in PC and van sales, respectively. UV volume grew by 17% YoY due to higher sales of Kia's SUVs supported by incremental volume from Kia Sonet, while MPV volume increased by 8% YoY (down 16% MoM).

Scooter & Motorcycle Segment: Scooter and motorcycle sales grew by 9% YoY and 15% YoY, respectively. Overall domestic 2W volume rose by 13% YoY (down 22% QoQ). Motorcycle and moped sales grew by 15% YoY (down 26% MoM) and 23% YoY (down 12% MoM), respectively. Further, 2W production was 2% lower than sales during the month.

3W Segment: Domestic 3Ws sales decreased by 58% YoY (down 34% MoM) to 23,626 units. 3W passenger carriers volume fell by 70% YoY, while 3W goods carriers sales grew by 1% YoY.

CV Segment: The SIAM has stopped reporting monthly CV volume performance since past 8 months due to unavailability of monthly CV volume data of select OEMs. Therefore, it reports only volume performance at the end of each quarter.

Exports: Overall exports grew by 13% YoY (up 1% MoM) to 4,59,295 units. PV and 3W exports fell by 29% YoY (up 2% MoM) and 22% YoY (down 13% MoM), respectively. Motorcycle exports grew by 23% YoY (up 1% MoM) in Nov'20.

Inventory: In PV segment, inventory decreased at the company level, as production was 3% lower than sales volume. In 2W segment, the inventory decreased at the company level, as production was 2% lower than sales volume.

Our View: We believe that monthly industry volume was lower due to inventory destocking, while positive sentiment, decent traction during just-concluded festival season resulted in decent retail sales despite ongoing pandemic. While the rural markets have already witnessed healthy volume up-tick in past few months, the urban markets have also started witnessing improvement now. Expecting healthy volume traction to continue in FY22E, we continue to remain positive on automobile sector.

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Source : Equity Bulls

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