Auto sales: Slower sequentially, but steady

The base effect of tepid numbers last year, along with customers advancing purchases, behind decent February performance.

Sales growth in February for most automobile companies moderated to a more restrained pace sequentially. However, the base effect from tepid numbers last year, along with customers advancing purchases (ahead of the expected increase in excise duty in the Budget) saw the companies post strong sales growth over February 2009 numbers.

In the two-wheeler category, total sales of Hero Honda, Bajaj Auto and TVS increased by a per cent sequentially, but higher by 33 per cent year-on-year. Similarly, on a year-on-year basis, Hero Honda’s February volume growth of 16 per cent was lower than the 23.5 per cent reported in January 2010. Citi’s analysts say, “Hero Honda continues to cede market share to Bajaj and TVS — its relative market share among these three has slipped to 56.2 per cent from year-to-date average of 59.6 per cent”.

Two-wheeler sales for Bajaj Auto rose sharply on the back of low base in the previous year and strong sales of its two power brands (Pulsar and Discover), but were nearly flat sequentially (0.7 per cent higher). Three-wheeler sales growth of 59 per cent came in as a surprise on the upside with its RE600 goods carrier doing well. However, exports lagged domestic sales and rose 50 per cent this month.

In passenger vehicles, a near 39 per cent year-on-year rise in exports provided a 200 basis points boost to Maruti’s total sales growth of 22 per cent in February 2010. Maruti’s largest contributor (A2 segment; Swift, A-Star, etc) grew 20 per cent, much lower than the 27 per cent growth in year-to-date and a shade lower than the domestic sales growth of 20.5 per cent for the month. The launch of Ecco helped the C segment report a 40 per cent rise in volumes in February.

Tata’s passenger vehicle sales were up a robust 43 per cent year-on-year, partly helped by a low base. While UV sales were sober at 14 per cent, strong sales of Indica and Indigo (aided by recently launched Manza), as well as Nano, saw car sales rise nearly 50 per cent. M&M’s UV sales, however, grew a strong 24 per cent. Its automotive division’s sales rose almost 40 per cent, helped by a near doubling of LCV and three-wheeler sales, which were driven by product launches (Gio and the newly launched Maxximo).

A low base and the ongoing economic recovery continue to help medium and heavy CV (M&HCV) makers post robust growth. Tata Motors’ sales almost doubled year-on-year to 18,183 (its LCV sales were up almost 50 per cent). For Ashok Leyland, sales of M&HCV (goods carriers) jumped sharply to 5,364 from 1,438 in February 2009 and contributed significantly to the rise in overall numbers.

Going ahead, while the 2 per cent increase in excise duty has meant higher costs for customers, the Budget’s proposal to lower the income tax burden on individuals is expected to boost consumption and hence, analysts expect auto sales to rise at a healthy pace in the medium term.