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Muted volume performance across segments
The volume performance for January 2019 was muted across segments. AL/MM posted numbers above expectations, while HMCL/TVSL/EIM missed estimates. MHCV players such as MM/EIM/TTMT witnessed a steep decline due to high base, surplus capacity and purchase deferrals during elections. PV players such as MSIL/MM recorded flattish performance, while TTMT posted a double-digit decline. 2Ws were a mixed bag, with companies such as HMCL/EIM registering a fall. BJAUT/TVSL clocked positive growth.
* MHCV volumes slumped
due to high base, surplus capacity and purchase deferrals during elections. Domestic MHCV volumes dropped for MM (-19%), EIM (-15%) and TTMT. In comparison, AL grew 13% due to higher volume of buses (+44%), low base and inventory build-up with dealers.
* PV wholesales were flat
for MSIL (flat) and MM (+1%), while lower for TTMT (-11%). Volumes are expected to improve ahead due to ramp-up in dispatches for new products (Maruti WagonR/Baleno, Mahindra XUV300 and Tata Harrier).
* Mixed bag in 2Ws
Domestic volumes were lower for HMCL (-9%) and RE (-7%), while BJAUT (25%) and TVSL (1%) clocked positive growth.
* Positive growth in tractors.
MM’s domestic volumes were marginally higher by 1%, while Escorts registered 12% growth. The market share gains have persisted for Escorts.
Our channel checks indicate that high base, rising cost of vehicle ownership, deferred purchases during elections, and selective funding by NBFCs constrained volume performances across the automotive segments. We expect the PVs and 2Ws segments to see a gradual improvement in volumes, supported by new products, volume pick-up in the state of Kerala, softening fuel prices, and the continuing uptrend in rural sales.
Among the OEMs, our top stock picks include Maruti Suzuki, Mahindra & Mahindra and Tata Motors, while we prefer Motherson Sumi and Apollo Tyres in ancillaries.
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