Automobile sector: Tractor segment upbeat; others struggle

February month provided a mixed bag of performance for the Automobile sector.

While tractor sales staged a strong come back, passenger vehicle (PV), commercial vehicle (CV), two-wheels (2W) sales continued to reel under pressure according to the data released by major automakers.

Wholesales were under pressure in CVs, 2Ws and PVs due to inventory correction by dealers and issues related to parts-supply from China. In comparison, the Tractor segment’s growth was robust and above estimates.

Among the listed players, Mahindra & Mahindra (M&M) registered a surge of 21% while Escorts registered 16% growth.

This positive growth is expected to continue in Mar’20 as well, due to a low base and better customer sentiment.

Maruti Suzuki India (MSIL) witnessed flat growth, while M&M(-58% yoy) and Tata Motors (-31%) witnessed notable declines, owing to supply issues.

Healthy volumes continued for unlisted players such as Kia Motors and Renault, driven by new products. Overall, industry volumes were lower by 8%.

Two-wheels witnessed decline volume in the domestic market for TVS Motors (-27% yoy), Bajaj Auto (-21%) and Hero MotoCorp (-20%).

Medium to heavy commercial vehicle (MHCV) volumes remain in the slow lane due to surplus capacity with transporters, inventory correction with dealers and financing issues.

Volume declines continued in the domestic market for Ashok Leyland (-47%), Tata Motors (-38%) and Eicher Motors.

The Tractors and PV segments are expected to see an improvement in the near term on a low base and improved rural sentiment.
In comparison, we expect a revival in CVs and 2Ws in H2FY21, driven by a low base and a gradual pick- up in the macro environment.

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