Automobiles - Retail growth aided by low base; mobility data weakens - ICICI Securities

In continuation to our mobility series, we are monitoring mobility and retail demand trends as we believe both these data points have a lead lag effect. Key takeaways for Dec'20: a) Mobility data improvement trends are stalling globally with some regions being more effected that others (e.g. Europe - Refer charts 1-4); India witnessed improvement in mobility trends in most states, with Eastern regions leading while South still remains a laggard (e.g. Telangana, Karnataka); b) on domestic retail demand trends, demand for PVs (up ~23% YoY) have outpaced 2Ws (up ~11%) owing to favourable base effect (BS-VI transition impact in Dec'19). Both segments (PV/2W) on a YTD basis remain down ~24%/36% respectively; tractor segment continued its strong demand trajectory up ~34% (Refer table 1), 3Ws segment still remain most impacted by lack of full scale reopening in urban cities; and c) retail market share trends indicate strong market share gains in PV's for Kia/Tata Motors (Refer table 9-16).

Key observations

- India's state-wise retail analysis indicates retail sales have increased across most categories on a MoM basis except PVs/2Ws (both down 10%/2% respectively). The consumer segment demand decline on MoM basis reflects the festive season effect in Nov'20 purchases. Registrations for tractors continued to buck the trend (up 36.8% MoM/ 34.2%YoY), upcoming winter crop cycle bodes well for demand sustenance. Dec'19 retail registrations base was potentially impacted due to BS-VI transition as consumers had deferred purchases for lucrative deals in Q4FY20. CV segment registrations trends have been relatively modest (unlike the trends in Dec'20 dispatches).

- In India, workplace mobility data after witnessing improvements in May/Jun'20, had plateaued in Jul/Aug'20 and had improved in Sept'20 across a few states. Dec'20 data reflects certain regions (led by East) clocking traffic similar to pre-Covid levels. Overall, the traffic rebound on an aggregate basis saw some improvement in workplace mobility (down 21% YoY), while transit mobility remained weak (down 17% YoY) as West and South remained the most affected.

- Few observations on OEM-wise market share trends: 1) strong market share gains (YTD basis) by Kia (320 bps YoY) and Tata Motors (200bps YoY) at the expense of Toyota, M&M and Honda potentially due to the gains for the winners in the SUV segment; 2); in 2W space, Honda and TVS Motors has made marginal gains in market share (up 40/50 bps respectively) on YTD basis; 3) relatively sticky market share segment - tractor also witnessed M&M and TAFE make gains on YTD basis (up 40/100 bps respectively).

Source : Equity Bulls

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