Published on 10/09/2019 10:46:38 AM | Source: Prabhudas Lilladher Ltd

Automobiles Sector - Slow start to festive off take By Prabhudas Lilladher

Posted in Broking Firm Views - Sector Report| #Auto Sector #Prabhudas Lilladher Ltd #Sector Report

Slow start to festive offtake

Our recent interaction with leading 2W/PV/CV channel partners in key markets of Delhi, Maharashtra, Kerala and Rajasthan indicate no sign of demand recovery as enquiries to conversion continue to remain weak YoY. However, with onset of key September festivals like Ganesh Chaturthi in Maharashtra and Onam in Kerala, there has been an increase of ~5-8% in retail sales (especially in PV and 2W segments) while CV sales continues to remain weak.


Key takeaways from our channel check arePV:

Excitement around new product launch drive enquiries

* PV demand trend remained weak across major markets with enquiries to sales conversion even weaker for existing models. However, recent new product launches like Venue, Seltos, Hector and XL6 helped to bring footfalls in the showrooms.

* The average inventory levels for most PV players remained at 25-30 days (stable MoM) except for TTMT where it is still higher at 35-40 days.

* PV sales in key festive states like Kerala is witnessing 5-8% MoM recovery in bookings, led by onset of Onam festivals. Our interaction with channel partners indicate there was no significant impact of floods in Kerala except within few regions of northern Kerala.


2W: Inventory still high despite continuous inventory correction

* While demand continues to remain weak in major markets, we note 5-8% volume recovery in rural pockets of Maharashtra.

* However, in tier 2 cities like Pune there is still no sign of demand recovery even for Ganesh festival yet, as volumes are down 10-15% YoY (festive to festive) so-far.

* We note marginal decline in 2W inventory levels at ~50 days (v/s 50-55 days) earlier.

* TVSL has taken price increase of Rs750 per unit for Apache.


CV: Weak freight availability continues to dent demand

* No improvement in demand as load availability remains weak across end user segments such as cement, heavy industries and agriculture segments.

* We note increase in average discount for heavy truck applications above 35 tons (~12% of industry sales) in key northern markets.


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