- Indian automakers got off to a good start to December thanks to year-end discounts and the wedding season boosting sales.
- While most segments are likely to report healthy year-over-year growth, sales are likely to decline sequentially due to production constraints and customers delaying purchases.
- Overall, the passenger car segment remains robust, while the two-wheeler segment is showing signs of recovery, according to research firms.
Indian automakers got off to a good start to December thanks to year-end discounts and the wedding season. Analysts, however, expect total sales in December to be lower than in November due to production restrictions and customers postponing purchases in the second half of the month due to an “unfavorable” period.
“By December 2022, passenger car volumes are likely to be higher on a year-over-year basis, although volumes will be lower on a monthly basis due to production constraints. Further, tractor volumes are likely to be better year-over-year, but down month-over-month due to seasonality,” said a report from Emkay Research.
The low base effect of the previous year is likely to be reflected in the year-over-year growth rates for all vehicle segments, but there may be successive declines in certain segments, particularly passenger cars. Analysts at Dolat Capital expect the two-wheeler segment to report growth on both a year-over-year and sequential basis.
“Demand for PVs is strong and there is a large backlog to drive volume growth in the coming quarter. The problems with semiconductor shortages, however, persist. Two-wheeler volumes are showing signs of recovery and expect further improvement led by a recovery in rural demand,” said a report from Dolat Capital.
Demand for passenger cars remains strong
Demand for passenger cars remained robust in December, according to channel checks by analysts at Emkay Research. Automakers reported a healthy increase in passenger car sales in the third quarter of FY23, driven first by the holiday season and then boosted by the wedding season.
“PV industry volumes should experience strong growth (15%+ year-over-year) thanks to a large order book. Among OEMs, we estimate domestic volumes will grow 64% year-on-year for Mahindra & Mahindra, and 25% for Tata Motors, while slightly down 4% for Maruti Suzuki India due to a six-day maintenance shutdown. report.
In addition to the maintenance interruptions, the spread of Covid in China has also exacerbated the chip shortage problem, leading to a production slowdown.
What has remained unchanged, however, is the customer buying pattern, with entry-level cars still being shunned by buyers. According to Dolat Capital, buyers are opting for more premium cars, which is also visible in the higher waiting times. As a result, automakers are now offering significantly higher discounts on entry-level cars compared to last year, the research firm said.
Two-wheeler sales show signs of recovery
The two-wheeler segment is expected to show strong sales growth of 15% year-over-year thanks to wedding season demand, according to the Emkay report. However, the boost only lasted until the second half of December, when the ‘unfavorable’ period began.
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Source: Emkay Research
In general, however, analysts believe that the two-wheeler segment is showing signs of recovery. “Two-wheeler volume is showing signs of recovery and we expect further improvement as demand recovers in rural areas,” the Dolat Capital report said.
On a sequential basis, the research firm expects companies to show volume growth of between 0.3 and 10%.
Interestingly, the two-wheeler segment is also weak in the entry-level segment, as is the passenger car segment. Unlike car manufacturers, two-wheeler companies do not offer material discounts to entice customers.
Rural demand picks up in Q4
According to Dolat Capital, a good Rabi season, aided by healthy reservoir levels and increasing government spending, is expected to boost two-wheeler and tractor sales.
According to the company, Hero MotoCorp, M&M and Ashok Leyland would be among the biggest beneficiaries, but it adds that demand for commercial vehicles could moderate in FY24 due to rising interest rates, limiting upside potential for the segment.
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