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Domestic despatches rise modestly on MoM basis

Two-wheeler (2W): Supply tilts towards domestic as exports provide cushion

* Hero MotoCorp (Hero) has reported sales of ~454k units, up 10% MoM. Motorcycle segment declined 4% MoM while scooter sales grew 10% MoM.

* Royal Enfield has reported 14% YoY / 6% MoM growth to ~48.3k units with new product launches (e.g. Meteor) aiding volume growth. Motorcycle sales in 350cc segment were flat MoM (up 3% YoY) at ~37.5k units while >350cc segment rose 12% MoM to ~6.5k units. Exports were down 34% at 4.75k units.

Passenger vehicles (PVs): Inventory rise on pent-up demand expectations

* Maruti Suzuki (Maruti) despatches rose 10% MoM to ~165k units led by exports which were up 25% at 21.2k units. Domestic growth was modest (up 8% MoM to ~141.2k units). Mini-vehicle segment grew 13% MoM at ~19.7k units while compact segment grew marginal 2% MoM to ~70.3k units. UV segment despatches rose 15% MoM at ~32.3k units.

* Despatches to Toyota also saw a bump in sales (up 14% MoM) at 4.7k units. Domestic PV sales (ex-commercial and Toyota despatches) were up 8% MoM at ~133.7k units. LCV sales were up 44% MoM to ~2.8k units as intra-city movement eases.

* Tata Motors’ volumes saw 25% MoM growth at ~30.2k units, after having aligned sales to retails in Apr’21 (which slipped due to lockdowns). Upcoming launch of compact SUV HBX is likely to further boost volumes in H2FY22.

* Hyundai posted 19% MoM rise in domestic volumes at ~48k units while exports fell 13% MoM to ~12.2k units.

* Toyota’s domestic volumes rose 49% MoM to 13.1k units. The surge in sales is likely driven by the success of Suzuki supplied models (Urban Cruiser, Glanza).

* MG Motors’ domestic sales rose 19% MoM to ~4.2k units.

* Honda Cars reported 16% MoM jump in sales at ~7k units. Domestic sales grew 27% MoM at ~6k units.

CVs, Tractors: M&HCVs witness sequential improvement while LCVs remain strong; Base effect normalises for tractors

* Eicher Motors’ CV segment volumes grew 75% MoM to 4.3k units.

* Escorts’ tractor volumes were up 23% YoY at ~6.6k units. Domestic volumes rose 22% YoY to ~6k units while exports stood at 509 units (up 38%).

* Tata Motors’ domestic CV segment volumes fared better than peers as it surged 11% YoY to ~21.8k units. M&HCV and LCV sales grew 9%/13% MoM to ~8.7k/13k respectively. Overall export volumes fell 15% MoM to ~2.1k units.

Our view: OEMs have started channel filing across categories (I-Sec est: 4-6 weeks) as enquiries and retail demand witnesses’ an uptick post easing of lockdown restrictions. Overcoming the challenges in production planning, OEMs have been able to push despatches on pent-up demand expectations and upcoming festive season.

Also, recently announced (Jul’21 onwards) salary revisions (DA hike of ~28%) for government employees’ (~11.4mn) could aid demand sentiments. However, the lack of any arrears could limit the positive impact of the revision as upfront vehicle costs are significantly up (~5-10% across segments since Jan’21). Faster vaccination could help improve consumer sentiment revival across both urban and rural markets in H2FY22.

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