Auto firms in for more pain in August, sales may plunge 35%

NEW DELHI: Despite big discounts, automakers are likely to report up to 35 per cent drop in volumes in August. Carmakers are seen taking the biggest hit, while two-wheeler makers may report double-digit fall in sales on a yearly basis, brokerages said.

Wholesale volumes should have improved as festive season is starting 10 days earlier this year, but declining retail sales and high inventory levels may have kept wholesale volumes muted in August, said Nomura India.

“For August, we expect passenger vehicle industry volumes to decline sharply by 31 per cent YoY. This would be led by Maruti Suzuki, which we expect could report a 35 per cent dip in domestic volumes, affected by weak retail sales,” the foreign brokerage said.

Motilal Oswal Securities said its channel checks indicates no signs of demand recovery at retail levels, as inquiries-to-sales remains tepid.

“Feedback on prefestive demand is not very encouraging, partly impacted by floods in several parts of the country and demand deferment in anticipation of some sops from the government. Most OEMs continued their inventory cutting efforts through production cuts,” the brokerage said. Personal vehicle space saw weak poor conversion rate for existing models, even as new launches attracted good response,” it said.

The brokerage expects Maruti Suzuki’s volumes to plunge 31 per cent, whereas it sees Mahindra & Mahindra’s utility vehicle (UV) segment falling 18 per cent. Tata Motors volumes are estimated to decline 33 per cent.

Kotak Institutional Equities sees 28 per cent drop in volumes for Maruti, 27.7 per cent drop in passenger vehicle sales for Tata Motors and a 14 per cent drop in UV segment for Mahindra & Mahindra.

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In the two-wheeler space, Kotak Institutional Equities sees 9-13 per cent drop in sales for players such as Hero MotoCorp, Bajaj Auto, TVS Motors and Eicher Motors (Royal Enfield).

Motilal expects Bajaj Auto’s sales to fall by 9 per cent, with the domestic business expected to see 14 per cent decline in volumes. Hero MotoCorp’s wholesales are estimated to fall 25 per cent on a yearly basis.

Nomura expects two-wheeler industry’s volumes to decline 22 per cent, the steepest since December 2018.

“Inventory levels remain very high and a retail demand recovery is needed to correct the 6-8 weeks inventory ahead of the BS-IV changeover,” it said.

In case of commercial vehicles, Motilal Oswal Securities said demand from all major end-user segments remains tepid, resulting in further increase in average discounts.

“We expect CV wholesales for Ashok Leyland to decline 36 per cent and for Tata Motors to decline by 42 per cent due to continued inventory correction,” the brokerage said.

Nomura said that the commercial vehicle industry is likely to witness a volume decline of 44 per cent. It expects flat volume for M&M largely led by early festive season this year.



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