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Auto sales: Expect no cheer in Sept, pickup likely this Diwali

The inauspicious Shraddh period and floods in select regions are likely to impact sales.

Updated: Sep 30, 2019, 08.07 PM IST
NEW DELHI: Investors expecting positive signals from September auto sales could be in for some disappointment as passenger vehicle (PV) volumes may fall by over 20 per cent amid high inventory levels.

Growth slowdown, inauspicious Shraddh period and floods in select regions are likely to impact wholesales, said analysts. The festive season, which kicked off on Sunday, could see some demand improvement in the runup to Diwali, they added.

September sales momentum has not seen much improvement, said Nomura India.

“However, for PVs, with heavy discounts on offer, the footfalls have improved, which should translate into much improved retail sales, as the festive season begins on September 29,” it added.

Brokerage Sharekhan said that inventories in the passenger vehicle (PV) segment stood at 4-6 weeks and at two-wheeler segment at 5-7 weeks, which have led to sustained weakness in demand. Commercial vehicles (CV) segment is likely to be the worst impacted segment with volumes likely to drop by 40 per cent, it said.

Higher base effect and financing issues may play a spoilsport in September, said Emkay Global, which expects auto sale cycle to see a gradual recovery due to the confluence of factors such as increasing discounts, better rural sentiment, lower interest rates, higher government spending and a possible introduction of the scrappage policy.

For the month gone by, Nirmal Bang Institutional Equities is expecting Maruti Suzuki to log a 32.4 per cent YoY drop in sales on a high base.

“For Mahindra and Mahindra, we expect tractor sales to decline by 41.5 per cent on a high base. Tata Motors is most likely to continue to underperform the market in the PV segment with ongoing inventory correction and slowdown in retail sales. We expect its commercial vehicle sales to continue to be affected by increased fleet capacity and slowdown in the economy. Similarly, we expect Ashok Leyland and Eicher Motors’ CV sales to also decline in high double digits YoY,” the brokerage said.

In the two-wheeler space, it expects Bajaj Auto sales to decline over a high base, although MoM may grow, driven by new model launches.

“Hero MotoCorp dealers already had high inventories at the start of the month and hence there seems to be very little scope for stocking up. Hence, we expect its sales to decline by 25 per cent YoY. TVS Motor’s sales are expected to decline by 29.4 per cent YoY on a high base. Its 3Ws continue to garner strong demand in export markets,” Nirmal Bang Institutional Equities said.

On net-net basis, Nomura India expects PV industry volumes to decline by 20 per cent on YoY basis, with sales fort Maruti Suzuki falling 24 per cent in domestic volumes.

For two-wheelers, it expects industry volumes to decline 17 per cent as inventory levels remain very high, and a retail demand recovery is needed to correct the 6-8 weeks’ inventory ahead of the BS-6 changeover.

The MHCV industry is likely to have a volume decline of 49 per cent.

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