Auto Sector Sales - June 2021 - Acuité Ratings & Research

Mr Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Auto Nos announced for June 2021.

Passenger Vehicles (PVs):

"The taper down of the second Covid wave from June and the subsequent lockdown relaxations leading to reopening of the auto dealerships have started to lead to a healthy volume recovery in the domestic automobile market. The overall domestic PV volumes recorded a 14.0% growth in domestic sales compared to that in Jun-19, reflecting some pent up demand and the delivery of previously booked vehicles. The figures are not comparable on a YoY basis as the sales in Jun-20 were significantly low due to the continuing impact of the national lockdown in the wake of the first Covid wave. Expectedly, on a sequential basis, the domestic sales has grown by 148% due to the sharp drop seen in May-20 given the effect of the stringent state level lockdowns set off by the second wave. The PV OEMs reported domestic sales of 650k units in Q1FY22, which reflects only a decline of 8% compared to 707k units in Q1FY20, a period without any economic disruption. The domestic sales of the market leader, MSIL reported 11.9% growth vis-à-vis Jun-19. While the domestic volumes of most of the other major OEMs declined between Jun 2019/2021, Tata Motors has reported a sharp uptick of 80.6% over this 2 year period owing to new launches from the company in the UV segment. We believe that the demand in the PV segment will continue to pick up in coming months with continuing unlocking measures and progress in the vaccination programme across the country."

Commercial Vehicles (CVs):

"Given the weakness in industrial activity aggravated by the second Covid wave, there are no visible signs yet of a recovery in the CV sector. The total domestic sales of the top 4 market leaders in the CV space witnessed a decline of 41.6% in Jun-21 as against Jun-19 although there was a sequential recovery of almost 100% from the lockdown disrupted May-21 sales. The market leader, Tata Motors registered a decline of 45% in domestic CV sales with Ashok Leyland and M&M also witnessing decline of 52% and 23% respectively in Jun-21 compared to Jun-19. With regular lockdown measures and restrictions in movement of goods across the country, the demand for CVs has continued to be challenged over the last one year and while a moderate recovery can be expected due to the normalisation in the economy, it is likely to be gradual over the next few quarters."

2W Segment

"As per the data released by the top four 2W players in the country, the segment witnessed positive pick up in overall sales in Jun-21 after registering a sharp decline last month.However, the sales volumes are yet to reach the pre Covid levels as reflected by a decline of 19% as compared to Jun-19. In Q1FY22, the total 2W sales reported is 2.7 million units as against 4.1 million units in Q1FY20, a significant drop of 35%. While such a decline can be attributed largely to the Covid lockdown, it is clear that the impact has been of a larger magnitude in the rural areas. The market leader, Hero Motors saw a decline of 24% in total sales during Jun-21 against Jun-19 whole other key players such as Bajaj Auto, Royal Enfield and TVS Motors also experienced a similar trajectory with drop of 12%, 26% and 16% respectively over the same period. Given Bajaj Auto's stronger presence in the export market and steady demand of 2Ws from countries in Latin America and Middle East, it has been able to offset the impact of still weaker domestic demand through a marginal export growth of 2% during the previous month as compared to Jun-19. Acuité believes that the demand in domestic 2W segment should rebound over the next 2 quarters with a favourable kharif crop outlook and unlocking across all states couples with steady progress in vaccination; however, the near term demand may take some time to reach pre Covid-19 levels given the severe effect of Covid 2.0 on rural livelihoods."

Source : Equity Bulls

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