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* Volume trend was positive, aided by early commencement of Navratri festival in September compared with October last year. Tractor and 2W OEMs registered positive growth, above expectations, on continuing inventory build-up with dealers in the run-up to the festive season. Further, PV volumes were higher, driven by a large order book, new products and ramp-up in production. In addition, CVs sustained robust growth momentum. We are upbeat about FY23, with expected volume growth of 30% for CVs, 28% for PVs, 16% for 2Ws and 5% for tractors. We retain our constructive view on the auto sector, with our preferred picks such as MSIL, MM, TTMT, HMCL, AL, and ESC.

* CVs maintain their uptrend, with robust growth in the passenger and cargo segments, supported by improved freight availability. Domestic volumes YoY grew at 129% for MM, 88% for AL, 15% for EIM-VECV and 9% for TTMT. Our channel checks indicate that AL is gaining share in MHCVs, buoyed by a favorable mix, new products and increased marketing efforts.

* PVs witnessed robust growth on account of a large order book, production ramp-up, and favorable base effect (on account of severe chip shortages last year). Among OEMs, domestic volumes grew by 163% YoY for MM, 133% for MSIL, and 85% for TTMT. The volume tally for MM and MSIL is being supported by commencement of dispatches of new products (Scorpio-N for MM and Grand Vitara for MSIL), with further ramp-up of dispatches expected ahead. Among unlisted OEMs, YoY volumes grew 79% for Kia, 66% for Toyota, and 50% for Hyundai. The large pending order book for PV OEMs provides visibility for the next few quarters.

* 2W volumes improved on festive demand (positive growth in initial days of the Navratri festival) and inventory build-up with dealers. To support volumes, OEMs such as HMCL have announced discounts to support sales in the festive season. Urban demand is better than rural, and scooters are doing well in comparison with motorcycles. Domestic volumes rose 170% YoY for EIM-RE, 28% for BJAUT, 16% for TVSL, and 0.4% for HMCL. EIM-RE volumes was robust due to a low base and strong response to its new model Hunter, given order bookings of >60,000 units.

* Tractor volumes grew on sustained inventory build-up with dealers in the run-up to the festive period. Domestic volumes grew by 43% YoY for ESC and by 21% for MM.

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