Auto Sector Update - Retails surge as mobility improves on ease in lockdowns By ICICI Securities
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Retails surge as mobility improves on ease in lockdowns
In continuation to our monthly series, we are monitoring mobility and retail demand trends as we believe both these data sets have a lead-lag effect. Key takeaways from Jul’21: a) Global mobility data witnessed sharp improvement in trends across regions post covid (e.g. France, Germany, US, Canada – charts 1-4) even as regions in EU are hit by 3rd wave (e.g. Italy, UK, Korea); India mobility data is also witnessing MoM improvement as covid cases recede and lockdowns ease (e.g. Maharashtra, Gujarat, Karnataka); b) overall, Northern and Southern states witnessed faster recovery (~12% decline in mobility data) while mobility recovery in Western and Eastern states was modest at -15/-30%(charts 7-10); c) in domestic retails, tractors/CV segment rose fastest at ~58%/48% MoM respectively.
Key observations
* India’s state-wise retail analysis indicates retail sales improvement across commercial segment (CV) categories on MoM basis (up 48%) as economic activity led by construction sector benefitted ICVs and tippers. Higher movement of goods and agri-products has also led to increases in freight rates thereby, supporting fleet profitability. Recovery in investment spend on key segments (e.g. road, infrastructure) could further aid demand recovery in H2FY22. Registrations for tractors grew most (up 58% MoM) on higher rabi sowing and increased government procurement. Improvement in rural cashflow (aided by both superior winter harvest and rising usage in infrastructure-related haulage activities) is likely to aid demand.
* In India, workplace mobility data, after witnessing many ebbs and flows of rise and stagnation between May’20-May’21, saw improvement (from <50% in May’21) across most regions. However, as covid cases subsided, mobility stats witnessed quick V-shaped recovery in most states. Jul’21 data reflects almost all regions are down by 6-30% YoY with South and North India being less impacted even as they witnessed delayed covid surge. On the positive side, Himachal Pradesh, Andhra Pradesh, Telangana and Haryana are reaching normalcy. Overall, traffic on aggregate basis dropped 9% in workplace mobility, while transit mobility fell 12% YoY with West being the most affected (charts 7-10).
* Observations on OEM-wise YTD market share trends: 1) Market share losses by Maruti Suzuki (530bps MoM on YTD basis) while Kia Motors (100bps) and Tata Motors (210bps) were the beneficiaries due to their new product successes; 2) in 2W space, HMSI has lost ground in market share (down 260bps), while Hero Motocorp gained 350bps likely due to better motorcycle demand vis-à-vis scooters in key 2W markets (e.g. UP, Bihar); 3) tractor segment also witnessed Escorts making modest gains (up 40bps MoM) at the expense of M&M (down 30bps).
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