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CVs likely to recover post 2HFY25

Mar’24 overall dispatches across segments were below est. except for CVs. PV wholesales grew 9% YoY led by sustained outperformance of UVs. 2Ws (BJAUT not reported yet) domestic wholesales declined 2% YoY while exports grew 30% YoY on a low base. CV volumes declined 5.5% YoY with MHCVs declining 8.5% YoY and LCVs declining 1% YoY. Tractors declined 24% YoY on account of weak agri sentiments and festival mismatch (Navratras in Mar’23). We expect domestic 2W industry to outperform other segments and post high single digit growth in FY25E led by steady demand for 125cc+ segment. We expect 4W segments (PV and CV) to post mid-single digit growth in FY25E. We also expect tractors to post mid-single digit growth in FY25E over a corrected base

* 2Ws (w/o BJAUT) (Below est.) Dispatches flat YoY: HMCL/TVSL were below est. while RE was inline. Wholesales for HMCL declined 6% YoY while for TVSL/RE it grew 12%/5% YoY. Domestic dispatches were muted and degrew by 2% YoY while exports grew 30% YoY on a low base. Overall 2W dispatches for FY24 grew 9% YoY. TVSL recorded highest ever Vahan retails for its iQube in Mar’24 despite moderating dispatches for smooth transition into new EV incentive scheme from Apr’24.

* PVs (Below est.) – Dispatches grew 9% YoY (UVs grew 21% YoY): Mar’24 Volumes for MSIL came in at 187.2k units (grew 10% YoY) while TTMT grew 14% YoY at ~50.3k units. MM UVs (incl pickups) grew 1.5% YoY to 59.8k units. Overall PV volumes grew 10% YoY for FY24 with UVs growing 26% YoY. As per TTMT management, entire incremental volume growth of FY24 has been driven by rising sales of emission friendly powertrains (industry growth in EV/CNG segments is expected to be 70%/55% v/s TTMT growth in EV/CNG segments at 48%/120%). TTMT management expects a single digit growth for the industry in FY25 on a high base with a double digit growth for sale of cars with emission friendly powertrains.

* CVs (Inline)– Dispatches declined 5.5% YoY: Mar’24 MHCV volumes declined ~8.5% YoY while LCVs volumes declined 1% YoY. MHCV volumes grew 3% for FY24 while it declined 4% YoY for LCVs. TTMT/AL/VECV volumes declined 10%/4%/6% YoY in Mar’24. As per TTMT management, 2HFY24 growth moderated due to elections across 5 states and upcoming general elections. Going forward, company expects CV demand to revive from later part of 2QFY25 on the back of strong GDP growth outlook and Government’s continued focus on infra investments.

* Tractors (Below est.)– Dispatches declined 24% YoY: MM/ESC volumes declined 26%/17% YoY in Mar’24 while it declined 7% YoY in FY24 for both OEMs. As per M&M “Govt’s announcement of increased advance estimate of horticulture production and Rabi wheat output higher than last year is expected to bring positive sentiments among farmers along with a normal south-west monsoon”. As per ESC, “The shift in Chaitra Navratri festival to April this year and last season's erratic monsoon patterns and resultant low water reservoir levels have affected agricultural sentiments in central and southern regions resulting in delayed harvesting of rabi crops. Looking ahead, as early signs point to an above-average monsoon in FY25, we anticipate that demand will stabilize post elections”.

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