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Sector performance

The month of November observed the festival of Diwali which was good for 2Ws, and SUVs. We observed a better Navratri season than Diwali. Overall festive season was up by 15-20% for 2Ws on the retail side and also premiumization. All segments and companies have posted sequential falls in more or less magnitudes. On a yoy basis, all the companies have posted growth. 2Ws posted a strong recovery as the sentiments improved and also on lower base of last year. For all the 2W companies the growth was above 20% yoy, while on mom basis, the declines were more than 10%. 2W exports have shown some strong signs of improvement sequentially as well as yoy, which can be an important parameter to trace it going forward. This growth was 6% for Bajaj Auto’s motorcycle exports segment and 9.5% yoy for TVS’s 2W exports. The negativity is due to countries like Nigeria and Bangladesh where there are still macro headwinds prevailing. We believe the mom fall seen in the auto sector overall, is the result of inventory built-up done in the previous month which got de-stocked in November.

On the PV front, SUV growth story remained intact and bucked the trend. On the CV side of the sector, we witnessed both Ashok Leyland and Tata Motors posting declines, on mom basis. For TaMo, the SCV segment has posted fall on yoy as well. LCVs have posted strong growths on a yoy basis as well. Tractors witnessed a reduction in volumes mom, while growing in mid-single digit yoy as El Nino impacted monsoons and ended up with a deficit at 94.4% of LPA thus recording below average rainfall in some of the important agricultural regions. This along with the cyclicality observed in this segment, and high base shall end up the year with muted growth. On a sequential basis, unseasonal rains in some of the major agricultural states leading to a negative impact on tractors.

Company wise performance  

Among the PV OEMs, MSIL has posted 1.64 lakh units. On a yoy basis, the total sales in the domestic markets came in 1.2% yoy while the exports grew by 16.3% yoy. Total sales came in at 3.4% up yoy. Going forward, the easing up of chip shortage should lead to faster exhaustion of the order book. Small cars in November de-grew by 445 yoy and 31.6% mom. The compact car segment dropped by 11.2% yoy and 20% mom. The SUV segment continued their splendid growth at 50.5% yoy propelling MSIL as the #1 SUV maker in the country. 

TaMo’s PV segment saw a 2% yoy and 10.6% mom de-growth sequentially. M&M’s SUV segment on the other hand, continued its strong run and jumped by 32% yoy and fell by 8.5% mom. CV division was up 13.4% yoy on LCV demand but down by 13.6% mom. M&M’s tractor business in the domestic markets fell by 37% mom and jumped by 6.5% yoy. Escorts Kubota also showed a similar trend as domestic tractor sales dropped 37% mom and grew by 6.7% yoy. With below normal monsoons and unseasonal rains in November, tractor sales may get impacted negatively in FY 24E as losses of ~Rs30 bn were seen in the states of Maharashtra, Gujarat and Rajasthan on crop destruction.

In 2W segment Bajaj reported a growth of 77% yoy while falling by 21.5% mom for its domestic motorcycles, while exports motorcycles fell by 5.9% yoy. The sequential growth of 0.6% is a positive sign indicating exports may have bottomed out, but it is too early to predict a strong bounce back as Nigeria is still reeling under currency pressures, despite demand remaining robust. Bangladesh is also facing macro issues, due to which exports are yet to revive completely. However, we need to follow this trend closely in the ensuing months. Their 3W segment moved up by 33% yoy domestically on a good pick up in the CNG portfolio and e-3Ws. Exports 3Ws however posted a slight de-growth of 2.6% yoy and growing by a whopping 24.3% mom.

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