Auto companies off to a good start this festive season

Automobile sector seems to be entering the festive season on a bullish note. Morgan Stanley says that the festive inventory built up has started for the sector and given that the festive season has started early this year, the sector also has the advantage of base effect.

 

Hero Motors managed to sell 1.7 lakh units in the first six days of Navratri festival. For the entire month the company a total of 6 lakh unit as compared to 4.7 lakh unit sold in September 2013. The company says that final numbers are expected to be much higher as despatches continued till the midnight of September 30.

 

Bajaj Auto however, could not match the growth of Hero Motors. Bajaj managed to post sales growth of 9% for the month of September 2014 (YoY) with sales of 3.99 lakh units. Broker Prabhudas Lilladher, commenting on the numbers said that though Bajaj Auto numbers were in line with its estimates they were a bit disappointing.

 

TVS on the other hand posted an 18% growth in its motor cycle segment at 98,052 units, but its scooter sales jumped up 63% at 70,508 units taking its overall sales to 2.4 lakh, a growth of 28%.

 

On the four wheeler front Maruti, the largest carmaker posted a 9.8% sales growth in September 2014 with sales of 99,290 units as compared to 90,399 units in the domestic market. However, the company saw its export sales falling by 28% leading its total sales of 1,09,742 units a growth of 4.6%. Compact segment (Swift, Ritz, Celerio, DZire), which account for nearly half its sales posted a growth of 18.1% to 43,304 unit, spearheading its overall growth. Semi-automatic Celerio which was launched in January continues to be the workhorse for the company.

 

Utility vehicle leader Mahindra & Mahindra (M&M) posted a 5% growth at 19,893 units in passenger sales. Overall M&M posted a 4% growth at 44,911 units. The company sold 15,979 commercial vehicles as against 14,709 units.  

 

Pickup in sales is clearly visible in the two wheeler segment as compared to the four wheeler segment. There is also positive outlook coming out from medium and heavy commercial vehicles. In a recent management meeting Tata Motors, analysts have noted green short shoots of growth.

Motilal Oswal in its report says that there are initial signs of recovery from the deepest and most difficult down cycle. M&HCV segment is likely to see a pickup in activity from the fourth quarter of FY15 while LCV growth will start showing from the first half of FY15. Fleet operator utilisation has improved from 60 % to 75% which will lead to replacement demand.

 

Sales in festive segment are expected to pick up going forward. ZyFin Research's Vehicle Purchase Sentiment Index [LINK] registered a steady uptrend since bottoming out in April 2014. In September 2014, the index increased by 2.5 points to 17.5, with moderate upticks in consumer willingness to purchase both two- and four-wheelers. This signifies that a larger number of Indian consumers are planning to purchase a two- or four-wheelers within the next six months.