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Auto monthly numbers: No end to the weakness!

Auto monthly numbers: No end to the weakness!
September 03
14:25 2019

Highlights:
– Disappointing numbers from auto majors in all segments
– Slowdown in economy, new axle load norms, tight liquidity and non-availability of finance weigh on CVs
– Two-wheeler and passenger vehicle segments continue to hit speed bump

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There seems to be no respite for the auto industry. Auto industry continues to face severe challenges arising out of weak macro environment and stricter regulatory framework. The severity of slowdown is clearly visible in August 2019 monthly numbers of auto majors.

We expect the pressure to continue in near to medium term. However, the possibility of good monsoon, festive cheer and pre-buying ahead of BS VI implementation are the hopes for demand traction in coming months.

Commercial vehicle (CV) segment numbers tanked significantly in the month compared to the same month last year. Tractor segment also continued to remain sluggish on the back of higher base of the previous year, delayed rainfall and subdued farm sentiment. Three-wheeler (3W) sales were mixed on the back of very high base of the last year. Two-wheeler volumes continue to be very disappointing due to higher cost of ownership, base effect and adverse macro factors.

Commercial vehicles – Challenges persist

Subdued demand sentiment due to economic slowdown, liquidity crunch and non-availability of finance have led to significant decline in the segment. This got further aggravated by axle load norm which increased carrying capacity in M&HCV segment. Additionally, customers have been postponing purchases, given the poor freight availability and the falling freight rates impacting their finances.

Company-wise, Tata Motors registered a 45 percent year-on-year (YoY) decline in CV volume, hit by a decline of 53.4 percent in M&HCV segment and 38.2 percent in LCV segment. Eicher Volvo also witnessed a drop of 41.7 percent. M&M and Ashok Leyland registered a slide of 28 percent and 47 percent, respectively. The weakness is now extending to the LCV segment as well, which was not the trend earlier.

Cars Segment – No respite

Pressure continues in the car segment with no respite in sight. Lacklustre demand in the space is owing to increase in total cost ownership led by mandatory long-term insurance.  Furthermore, implementation of safety norms has led to increase in prices and impacted sales amid weak consumer sentiment. Hence, companies in the space have seen a decline in PV volume for August.

The leader, Maruti, saw a sharp volume decline of 34 percent for the month. Tata Motors’ and M&M’s passenger car segment too witnessed a YoY fall of 57.8 percent and 31.6 percent, respectively.

CArs

Two-wheeler (2W) segment: Disappointing

Sales of Hero, the leader in the space, came down 20.7 percent, Eicher, the leader in the premium bike segment, met with the same fate, with a decline of 23.7 percent in its monthly sales numbers. The sales figures for Bajaj Auto and TVS were down 20.8 percent and 16 percent, respectively.

2W

Three-wheeler (3W): Muted growth

The overall 3W market posted mixed numbers in August. TVS and M&M posted a sales growth of 11.1 percent and 1.6 percent, respectively, in this space. Bajaj Auto, the leader, logged a decline of 5.7 percent.

3W

Tractors: Muted farm sentiment impacted demand

Delayed rainfall, monsoon deficit and uneven rainfall distribution have played spoilsport for the tractor segment. Escorts sales fell a significant 19.5 percent and the fall for M&M stood at 16.7 percent.  M&M management expects that the improved monsoon spread and sowing pattern for the Kharif crop is likely to help boost rural sentiment going into the festive season.

Tractors

Exports: Mixed sentiment

Export numbers are mixed for August. Maruti, M&M, TVS, and Tata Motors sales fell whereas Eicher Motors, Bajaj Auto and Escorts posted growth in volumes.

Exports

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