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Pre-Festive Sales Pick Up For Auto Companies

After facing major headwinds and slower growth in sales volume over the last few months on account of high interest rates, elevated fuel prices and changing sales trends, automobile manufacturers saw moderate growth with the festive season getting underway. Changing trends have led to high growth coming from utility vehicles (UV) and light commercial vehicles (LCV). At the same time, sales have been declining in the case of medium and heavy commercial vehicles (M&HCV) and petrol cars. This has got manufacturers struggling to position themselves to synchronize with the changing dynamics and thus make the most of the opportunity offered.

YoY growthOct-12Sep-12Aug-12Jul-12Jun-12May-12Apr-12
MSIL 85.46 9.84 -40.78 9.21 20.3 -5 3.4
Tata Motors 5.53 -3.82 12.09 14.97 -3.04 3.61 -6.67
M&M 28.75 9.53 21.63 18.74 16.13 28.16 26.89

Maruti Suzuki (MSIL) staged a comeback recently with better than expected Q2FY13 results and now with impressive monthly sales figures. On account of production being hampered at the company’s Manesar facility, MSIL’s inventories dried out while the order intake continued. Now that production has come back to normal, its October sales grew by 85.46 per cent over the corresponding month in the previous year. This was also on account of issues at Manesar in October last year giving this month’s sales a base effect. MSIL has been getting a tremendous response with the launch of Ertiga and Alto 800. While the Ertiga makes MSIL’s presence in utility vehicles stronger, the Alto 800 has received more than 30,000 bookings in a very short time, poising the company for higher growth in the coming months.

Tata Motors, however, saw moderate growth and followed overall trends with growth only from UVs and LCVs of 11.95 per cent and 59.46 per cent respectively. The sale of passenger cars and M&HCV declined by 21.50 per cent and 27.95 per cent respectively. Mahindra & Mahindra (M&M), which has been consistently outperforming due to its strong positioning in UVs, saw massive success with the launch of the XUV. Its newly launched Quanto got 5,000 bookings in three weeks. Overall, the company registered YoY sales growth of 28.75 per cent in October 2012. Overall, the volume growth of passenger cars has been varying, with Toyota, Hyundai and Ford growing and General Motors declining.

YoY growthOct-12Sep-12Aug-12Jul-12Jun-12May-12Apr-12
Hero Motors 3.31 -26.35 -11.88 -1.39 4.26 11.28 6.66
Bajaj Auto 4.11 -13.77 16.1 -5.38 -1.38 1.24 6.23
Honda 40.65 36.13 38.65 56.9 52.32 52.02 45.53
TVS 3.66 -22.46 -20.65 -15.1 4.00 -5.33 -7.54

The sales of two-wheelers, which also came under the grip of the slowdown, saw moderate growth. TVS Motors, after three consecutive months of double-digit decline in sales volume, grew by 3.66 per cent in October 2012. Contrary to the underperformance has been Honda, which continues to be robust, having grown by 40.65 per cent in October 2012 over October 2011. The two largest manufacturers, Hero and Bajaj grew moderately as compared to the previous year. The YoY volume growth for Hero and Bajaj for October came in at 3.31 per cent and 4.11 per cent respectively. The month marked the highest-ever sale for Hero.

The much-awaited festive season has begun for automobile manufacturers and pre-festive growth seems to have picked up as is evident from the October numbers. The companies are optimistic about sales in November but this would be on account of seasonality. The macro trends being unchanged, especially with unmoved interest rates keeping financing expensive, a reversal in the downward trend seems highly doubtful.

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