Auto Sector Update - Jan`21 volume review: New Year commences on a positive note for Tractors, PVs and 2Ws By Emkay Global
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Jan’21 volume review: New Year commences on a positive note for Tractors, PVs and 2Ws
* Wholesales for Tractors, PVs and 2Ws were positive yoy in Jan’21, whereas CV wholesales were lower. Our channel checks indicate better retail sales yoy in Tractors, PVs and Cargo MHCVs, while it was subdued in entry level 2Ws.
* Domestic Tractor industry growth stood at 46% yoy, supported by better retail sales, channel filling and ramp-up in production levels. Among listed OEMs, MM grew 50% and ESC saw 46% growth. In comparison, large unlisted OEMs TAFE and Sonalika registered growth of 51% and 46%, respectively. YTD, MM and ESC have lost share due to production constraints. Dealer inventory stands at 3-4 weeks.
* Domestic PV industry volumes grew 15% yoy, helped by growth across most OEMs. TTMT was an outlier with 94% growth. Production/supply constraints have limited dispatches for MM and MSIL, resulting in growth of 4% and 2%, respectively. Discounts have declined yoy by up to 2% of vehicle prices due to strong demand. Dealer inventory stands at low levels of 1-3 weeks.
* Domestic 2W volumes were mixed yoy. TVSL grew strongly at 26% and EIM-RE grew 5%, while BJAUT was flat and HMCL witnessed a 4% decline. Performance has been better for premium and executive segments, whereas the entry segment has declined. Dealer inventory stands at 4-6 weeks.
* Domestic CV volumes were also a mixed bag, with 14% jump for AL, 2% growth for EIMVECV, 2% fall for TTMT and 41% slump for MM. Production/supply constraints affected dispatches for MM. Our channel checks indicate dealer inventory levels of 2-3 weeks.
* The Automobile sector remains a key beneficiary of economic recovery and low interest rates. We expect robust volume performance in CVs, PVs and 2Ws in FY22. Our top picks are Tata Motors, Maruti Suzuki, Ashok Leyland, Eicher Motors and Hero MotoCorp. Key downside risks to our calls and estimates include delays in economic recovery, rising competitive intensity and adverse movement in currency/commodity prices.
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