Auto shares trade mixed ahead of Sept sales data; here's what to expect

Shares of automobile manufacturing companies traded mixed in Thursday’s intra-day session amid expectations of weak September sales data due to semi-conductor shortage. The auto companies are slated to report their monthly sales figure on Friday.

At 9:50 AM, the Nifty Auto index was unchanged, having reversed 0.4 per cent-loss logged earlier in the day. Eicher Motors, Bajaj Auto, Hero MotoCorp, and Maruti Suzuki were down up to 1 per cent while Tata Motors, TVS Motor Company, and Bharat Forge were up between 0.4 per cent and 1.1 per cent.

Shares of auto ancillary companies, meanwhile, were largely positive. Tube Investments of India, MRF, Balkrishna Industries, and Exide Industries, for instance, were all up in the range of 0.1 per cent to 0.9 per cent. In comparison, the benchmark Nifty50 was down 0.11 per cent.

According to analysts at Emkay Global, commercial vehicles (CVs) should maintain positive momentum in September while passenger vehicles (PVs) volumes are likely to be hit by the chip shortages, despite a healthy order book. Two-wheelers and tractors, meanwhile, are likely to decline due to a high base on account of inventory filling last year.

“Two wheelers industry volumes are likely to be significantly lower compared with last year due to a high base on account of inventory filling. In addition, chip shortages have affected dispatches for premium motorcycles. We expect domestic volumes to decline by 19 per cent year-on-year for TVS Motor, 23 per cent for Bajaj Auto, 33 per cent for Hero MotoCorp, and 50 per cent for Eicher Motor-Royal Enfield. Exports are likely to witness positive growth due to healthy demand and stable currency rates in key markets,” the brokerage said in a report.

For those at Nirmal Bang, September sales could be materially impacted due to the ongoing supply constraints (chip shortages which are more prevalent in PVs) and high base effect (for two-wheelers and tractors).

“Our interactions indicate strong demand for PVs, supported by increased preference for personal mobility, high order books and low inventory/new product launches. Discounts have moderated further due to current demand-supply mismatch. While festivals could be a tad disappointing, we see scope for regaining lost volume during the leaner months post festivals, led by strong demand and improving supply chain dynamics,” the brokerage said.