Automobiles Sector Update - Retails surge on pent-up demand as lockdowns ease By ICICI Securities
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Retails surge on pent-up demand as lockdowns ease
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 Jun’21: a) global mobility data trends remain on the upward trajectory across regions post covid (e.g. France, Italy, US, Korea – charts 1-4); India mobility data witnessed MoM improvement as covid cases recede and lockdowns ease (e.g. Maharashtra, Gujarat); b) overall, Eastern and Southern states were most impacted (~35% decline in mobility data) while drop in Western and Northern states were relatively lower at ~20-25% (charts 7-10); c) in domestic retails, PV segment rose ~114% MoM while 2W grew ~127% MoM.
Key observations
India’s state-wise retail analysis indicates retail sales have improved across commercial segment (CV) categories on MoM basis (up 110%) as economic activity led by construction sector benefitted ICVs and tippers. Higher movement of goods and agri-products have also aiding increases in freight rates and thereby 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 215% 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. Retail registrations saw marginal impact from limited operations at RTOs due to lockdowns in various states
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. Jun’21 data reflects all regions are down by 15-50% YoY with South and East India being more impacted as they witnessed delayed covid surge. On the positive side, Gujarat and Haryana are recovering fastest. Overall, traffic on aggregate basis dropped 21% in workplace mobility, while transit mobility fell 24% YoY with East being most affected
Observations on OEM-wise market share trends: 1) Market share gains (MoM basis) by Kia Motors (204bps MoM) at the expense of Maruti Suzuki (193bps) was likely due to traction of SUVs; 2) in 2W space, HMSI made strong gains in market share (up 207bps MoM), while Hero Motocorp lost 223bps likely due to stronger recovery in urban states (e.g. Karnataka, Gujarat, Maharashtra); 3) tractor segment also witnessed Escorts making gains (up 191bps MoM) at the expense of Mahindra (down 234bps)
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