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PVs shine; 2Ws/tractors report weak volumes

Two-wheelers (2Ws): Domestic despatches post modest growth

* Hero Motocorp (HMCL) reported wholesale volumes of ~446k units, down 8% MoM and 2% YoY. Motorcycle segment volumes declined 9% MoM, while scooter volumes grew 4% MoM. We believe with the onset of normal monsoon in most parts of the country and the upcoming festive season, domestic mass market 2Ws should witness improving retails August onwards.

* Bajaj Auto (BAL) sales were up 2% MoM at ~355k units. Domestic sales were up 32% MoM to ~183k units while exports declined 18% MoM to ~172k units. On a segment level, motorcycle sales were flat MoM (domestic up 31%, exports down 21%) to ~315k units while 3Ws grew 28% MoM to ~40k units. Exports declined 18% MoM post a strong June as domestic demand is expected to pick up with festive season starting from August.

* TVS Motor (TVSM) reported 2% MoM volume growth in 2Ws at ~300k units, up 14% YoY. Domestic 2W volumes grew 5% MoM, rose 15% YoY, at 202k units while 2W exports fell 3% MoM at ~98k units. Overall 3W volumes at 15k units were up 9% MoM (down 7% YoY) with 14.3k units exported (up 2.6x MoM). On a sub-segment basis, motorcycle volumes were up 5% and scooter volumes grew 10%, MoM. Moped volumes fell 23% MoM to 33k units. Overall, sales were resilient in an adverse demand situation in domestic 2Ws, although premium models continue to be partly impacted by chip shortage.

* Royal Enfield reported 10% MoM decline in sales volumes to ~56k units (up 26% YoY) with exports at 9k units, down 9% MoM (up 27% YoY). Motorcycle sales in 350cc segment were down ~8% MoM to ~46k units and that in >350cc segment were down 16% to 9.2k units. Post consistently clocking >60k units for the past 4 months, wholesales fell to 56k signaling continued chip-supply issue. Passenger vehicles (PVs): Despatches breach Q4 highs

* Maruti Suzuki’s (MSIL) domestic despatches grew 18% MoM to ~156k units albeit on a lower base of June which was Brezza run-out period. MSIL had production of 40k units for UVs against wholesales of 23k units likely from the phasing out of Brezza. Exports were down 15% MoM (down 3% YoY). Most segmental volumes witnessed higher despatches to the range that MSIL has been reporting in the past four months.

* Mahindra & Mahindra (M&M) reported 4% MoM growth in PV volumes at ~28k units with 5% UVs growth MoM. We believe continuous strong volumes in UV segment are likely on the back of good market acceptance of XUV700 and Thar, as well as improvement in the supply of chips. Thus, an orderbook of >100k for new Scorpio-N should aid in improving its UV market share.

* Tata Motors reported its highest monthly sales volume of 47k (up 5% MoM), with EVs registering 4k units, ~5.7x up YoY (up 15% MoM). Launch of Tigor EV and new Nexon EV Maxx may push EV sales to >5k/month. Our view: PV OEMs are likely to see improvement in volumes with improving production and new launches for the festive season starting from August. Many leading OEMs have had new UV launches/refreshes to capture the demand spurt in the festive period (i.e. Mahindra, Toyota, Hyundai and Maruti Suzuki). Though commodity costs have partly cooled off since May’22, we believe OEMs are unlikely to reverse pricing post having taken cumulative ~10% price hikes in the past 9 months.

Our view: PV OEMs are likely to see improvement in volumes with improving production and new launches for the festive season starting from August. Many leading OEMs have had new UV launches/refreshes to capture the demand spurt in the festive period (i.e. Mahindra, Toyota, Hyundai and Maruti Suzuki). Though commodity costs have partly cooled off since May’22, we believe OEMs are unlikely

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