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Retail demand remains soft
Our monthly retail series report based on the retail registration data available from Vahan (MoRTH) for Jan’20 covers 1,130 of the 1,421 (~80%) regional transport offices (RTOs). Key observations for the month: a) Registrations in Jan’20 witnessed a drop of ~9% YoY (Nov’19/Dec’19 was 1%/-17% YoY respectively); b) PV / 2W registrations declined (-7% / -11% YoY) up 26% / down 3% MoM; c) CV segment saw a modest decline of 6% YoY (Dec’19 was down -24% YoY); d) on segmental basis, improvement in retail was witnessed in ICE 3Ws and e-rickshaws (3% YoY / 28% YoY); e) tractor demand continued to remained positive at 1% YoY (reflects a possible improvement in rural sentiment); f) channel checks indicate conversions remain highly correlated to discounts; Jan’20 witnessed continued discounts on MoM basis across pending BS-IV / new BS-VI vehicles; g) on a state-wise basis, the key states performing relatively better are the more rural-oriented ones (refer to tables inside), e.g. Bihar, Odisha, Uttar Pradesh, etc.
* Our view: Retail demand slowdown in Dec’19 continues across consumer segments (PVs, 2-Ws) signaling weakness in consumer sentiment. On the positive side, demand in 3-W and tractor segments seem to be trending positive, which could be again a reflection of better rural sentiment vis-à-vis urban demand. On a state basis, Uttar Pradesh and Bihar have continued to drive growth (refer table-2) while Karnataka and Gujarat continued to display highest weakness amongst the top-8 states. Going forward, we expect wholesales to track retails considering the BS-VI changeover in Mar’20. Though incentives across OEMs peaked in Dec’19, we do not expect major decreases in Q4FY20 due to the demand situation. Attractive product launches in the upcoming Auto-Expo could aid in improving the demand outlook for FY21.
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