During November, all automakers reported weaker-than-expected numbers due to soft demand
Indian auto industry witnessed weaker sales during November across the segments. While passenger car and medium and heavy commercial vehicles (MHCV) volumes declined tractor sales were the only exception where growth was higher than expected. Two-wheeler volumes increased mainly due to 43% higher sales reported by Honda Motorcycle and Scooter India, Pvt Ltd (HMSI).
Nomura feels if the current trend continues, there may be downside risks to its FY14 volume estimates for Bajaj Auto Ltd and commercial vehicles (CVs) Ashok Leyland and Tata Motors. "There could be some upside risks to our volume estimates for Hero MotoCorp Ltd (HMCL)," it said in a research note.
During November the demand subdued, however lower commodity prices are positive for profitability of automakers, Nomura said.
The note says, "As per our discussion with the companies, demand is soft post the festival season. Discounts came down marginally in the October-November period but can inch up higher in December. However, companies sounded more positive on profitability as commodity prices have come down and thus recent price increases should lead to better margins, we believe."
During the month, car industry volumes declined 7%, while two-wheeler volumes increased 6-7%. Nomura said, "HMSI reported a strong set of numbers (up 43%), led by robust growth in both bike and scooter segments. HMCL’s volumes increased by about 6%, below Nomura’s expectations of around 10% growth. Bajaj Auto saw a 29% decline in domestic motorcycle volumes compared to our expectations of 12% decline. As per the company, this was partly due to run-down of inventory and lower production of newly launched Discover 100M. TVS saw 10% decline in domestic two-wheeler volumes while Yamaha’s volumes increased by about 7%."
According to Nomura, overall MHCV industry volumes weakened further in November. "Volumes declined by about 35%, much below our expectations of 15% decline. Volumes for Tata Motors declined, by about 28%, while Ashok Leyland saw a 40% decline in MHCV volumes. Eicher’s total CV volumes fell by 44%," the report said.
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