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MM and MSIL outperform in PVs; BJAUT and TVSL in 2Ws

* We have analyzed model-wise data for two-wheelers (2Ws) and passenger vehicles (PVs) for YTDFY24. Following are the key highlights:

* In motorcycles, the 100cc segment’s contribution has now fallen to 48.6% in YTDFY24 from 56.9% in FY20. As a result, Hero MotoCorp (HMCL) has lost its market share in domestic motorcycles by 300bp to 43% for YTDFY24.

* In the 125cc segment, TVS Motor (TVSL) has been the biggest outperformer, with its market share rising by ~680bp to 15.1%. In the 150-250cc segment, Bajaj Auto (BJAUT) has been the biggest gainer, with a 390bp jump in market share to 34.6%.

* In the 250cc+ segment, Royal Enfield (RE) has lost 400bp share to new launches from Harley Davidson (through HMCL) and Triumph (through BJAUT).

* In PVs, we believe Maruti Suzuki India (MSIL) has done well to sustain its share at 42%, despite the fact that the car segment, which contributes to 57% of its mix, has declined by 12% YoY.

* For MSIL, Fronx and Grand Vitara continue to drive UV growth, while Jimny is not doing well.

* Mahindra and Mahindra’s (MM) biggest growth driver in UVs in FY24 has been Scorpio.

* For Hyundai, the launch of Exter has helped boost volumes in the compact SUV segment without materially cannibalizing Venue sales.

* While we expect 2Ws to continue to outperform other segments even in FY25, this seems fully priced in after the recent strong rally in 2W stocks. MM is our top pick among Auto OEMs as we expect new launches to continue to help the company drive market share gains in PVs.

2Ws update

* The overall ICE 2W industry (including exports) has posted 8.6% YoY growth for YTDFY24 to 19.2mn units. Domestic sales have increased by 12.5% YoY, whereas exports have declined 8% YoY due to global inflationary headwinds.

* Within domestic 2Ws, motorcycles are up 13.4% YoY for YTD, scooters are up 11% YoY and mopeds are up 9% YoY.

* Given the outperformance of motorcycles, their contribution in overall 2W mix has increased by 50bp YoY to 66.4% for YTDFY24, while the contribution of ICE scooters has declined by 50bp to 30.8% and mopeds largely stable at 2.7%.

* Domestic motorcycles: The growth in domestic motorcycles has been driven largely by the 125cc and above segments: 125cc segment up 15% YoY, 150- 250cc segment up 22% YoY and the 250cc+ segment up 19% YoY. On the other hand, the 100cc segment continues to underperform the industry and is up about 9% YoY. Given the overall weakness in the 100cc segment, HMCL continues to lose share, down 300bp YoY at 43% for YTDFY24. On the other hand, BJAUT has gained 100bp to 18.3% and TVS has gained 180bp to 10.6%.

Market share movement in each of the motorcycle categories

* 100cc segment: Given its sustained underperformance over the years, the 100cc segment’s contribution in motorcycles stands at 48.6% for YTDFY24 vs. 56.9% in FY20. Honda Motorcycle and Scooter India (HMSI) has gained ~300bp share YoY to 6.1%, led by a ramp-up of its Shine 100cc. HMCL’s market share, on the other hand, has declined by 140bp to 77.4% given its dominant position in this segment. BJAUT’s share has also fallen by 150bp to 10.3% as the company seems to be focusing more on the 125cc+ segments.

* 125cc segment: The segment has posted 15% YoY growth for YTDFY24. On the back of its continued outperformance, the segment’s contribution to domestic motorcycles has now increased to 27.4% for YTDFY24 (vs. 21% in FY20). TVSL has substantially outperformed peers with 111% YoY growth and a 685bp gain in market share to 15.1% in this segment. BJAUT has also outperformed industry growth and posted 29% YoY growth and a 290bp share gain to 27.2%. On the other hand, while HMSI’s market share has dropped by 680bp to 40.6%, HMCL saw a 300bp loss in share to 17.1% for YTDFY24. This is why the success of HMCL’s recently launched Xtreme 125R will be very critical in helping it recover its lost share in 125cc (dispatched 3,504 units in Feb’24).

* 150-200cc segment: This segment has now grown by 22% YoY for YTD and makes up for 15.9% of domestic motorcycles (largely stable relative to FY20 level). Both BJAUT (+37% YoY) and HMSI (+31% YoY) have outperformed peers. While BJAUT has gained 390bp share to 34.6%, HMSI has gained 100bp share to 16.3%. On the other hand, while TVSL’s share has fallen by 130bp to 21.2%, India Yamaha’s share has declined by 300bps to 22.5%. Even HMCL has seen a 90bp fall in its market share to 3.8%, despite a low base and new launches.

* 250cc+ segment: The segment has posted 19% YoY growth for YTDFY24 and now forms 8.1% of domestic motorcycles (vs. 6.1% in FY20). New players continue to gain share at the expense of RE, which has underperformed the industry and grown 14% YoY for YTDFY24. As a result, it has seen about 400bp market share decline in this category to 88.5%. However, it is also important to note that BJAUT Triumph (averaging 2.8k units per month YTD) and HMCL HD (averaging 2.4k units per month YTD) have not been able to ramp up on expected lines so far.

* ICE scooters: The segment has grown 11% YoY for YTDFY24. Suzuki has substantially outperformed with 26% YoY growth and has increased its market share by 200bp to 16.3%. On the other hand, HMSI’s share has declined by 260bp to 47.4% and TVSL’s share has inched lower by 30bp to 23.3%.

Highlights on specific models:

* HMSI’s Shine100 is now averaging 24k units per month for YTDFY24.

* It is important to highlight that part of the reason for HMSI’s market share loss was the company’s persistent production-related issues. Those issues seem to be behind now as Shine 125cc is now averaging 119k units per month since Aug’23 from an average of 89k units per month in the first four months of FY24. Even in the 150-250cc segment, HMSI is now averaging around 30k units per month vs. nil in the first two months.

* BJAUT seems to have discontinued its CT125cc product, which has clocked nil sales for the last two months now.

* Despite a new launch, HMCL has not been able to improve sales of Xtreme160R, which is averaging about 2.8k units per month.

* The newly launched Karizma seems to be taking time to ramp up and has ramped up to 2,100 units in Feb’24.

* For RE, one trend is that Hunter sales are now slowing down (averaging 13.8k units for 2H vs. 16k units for 1H), Bullet 350cc sales have picked up (averaging 14.8k units per month for 2H vs. 10k units per month for 1H).

* In scooters, Xoom volumes seem to be fizzling out now (5k units per month in 2H and 3.3k for the last two months vs. 9.5k units per month for 1H). On the other hand, Destiny 125 has picked up very well (averaging 14k units per month from 9k units per month for 1H).

Passenger Vehicle segment update

* The PV industry has so far grown by 8.4% YoY for YTDFY24. However, UVs continue to outperform PVs and are up 26% YoY for YTD. On the other hand, cars have declined by 11% YoY so far. As a result, UVs’ contribution has now increased to 59.4% of PV sales (vs. 34% in FY20), while cars’ contribution has slipped to 37% of total volumes (vs. 61% in FY20).

* Car segment: Among key players, Tata Motors (TTMT) has outperformed the car segment and has posted 3.5% YoY growth, led by healthy demand for its twin cylinder CNG tech. Even Toyota has posted strong growth at 34% YoY. On the other hand, MSIL has seen a 12.4% YoY decline and Hyundai has posted a 13.7% YoY decline. Overall, MSIL has lost 80bp share to 63% and Hyundai has lost 40bp share to 14.7%. Similarly, TTMT has gained 170bp share to 12% and Toyota has gained 120bp share to 3.5%.

* UV segment: MSIL (+77%), MM (+31%), Hyundai (+28%) and Toyota (+44%) have all outperformed the industry in YTDFY24. On the other hand, TTMT has posted just 5% YoY growth, while Kia sales have declined 9% YoY. As a result, MSIL has been the biggest gainer, with a 740bp rise in its market share to 25.5%. While MM has gained 60bp share to 18.3%, Hyundai has gained 30bp share to 15.4%. Meanwhile, TTMT has lost 300bp share to 14.9% and Kia has lost 390bp share to 10%.

* Domestic PVs: It is important to highlight that despite a 12% decline in cars (56% of its mix), MSIL has been able to marginally gain share in PVs to 41.8%, led by a strong outperformance in UVs. While MM has gained 180bp share to 10.9%, Hyundai has gained 140bp share to 9.2% and Toyota has gained 130bp share to 5.7%. On the other hand, TTMT has lost 40bp share to 13.5% and Kia has lost 110bp share to 5.8%.

Highlights on specific models:

* One of the key growth drivers for MSIL has been Fronx, which is now averaging 11k units per month since its launch in Apr’23 and has been improving (Jan-Feb sales at 14k units per month)

* Grand Vitara has also scaled up well for MSIL and has averaged 10k units per month in YTD.

* On the other hand, Jimny seems to be fizzling out. While it started with an average of around 3k units per month in the first few months, the model is now clocking just 400 units per month for the last three months.

* MM’s biggest growth driver has been Scorpio, which is now averaging 11.4k units per month for YTD and 14.5k per month for the last two months vs. 6.4k units per month last year.

* XUV400 has now picked up to about 1,500 units per month for the last two months.

* For Hyundai, the launch of Exter has helped ramp up its volumes in the compact SUV segment. Before its launch, Venue was averaging about 11k units in this category. After the launch, Hyundai is now selling 19k units per month in this segment, with 8k units of Exter alone without any material cannibalization to Venue so far.

* HMSI’s Elevate is so far selling an average of 4.5k units per month for the last six months since launch.

* Toyota has gradually addressed its supply issues and has now been able to ramp up its Innova sales to 8.5k units per month since May’23, split largely equally between Innova Crysta and Hycross.

* MSIL’s Invicto has been selling at a run rate of just under 500 units per month.

Valuation and view

* While we expect the 2W segment to continue to outperform other segments even in FY25, this is fully priced in after the recent strong rally in 2W stocks.

* MM is our top pick among Auto OEMs as we expect new launches to continue to help the company drive market share gains in PVs.

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