PVs a Mixed Bag, 2W & Buses Shine; Recovery in Tractors Remain Monitorable
Jun'24 Wholesale Volumes: The domestic PV sales (Exhibit-2) grew by 5% YoY (down 3% MoM), largely led by strong domestic SUV volumes across Original Equipment Manufacturers (OEMs) , which were partly offset by weakness in entry-level cars. The domestic 2W industry (excl HMSI) witnessed volume growth of ~11% YoY (down 3% MoM) led by rural recovery; however exports declined 4% YoY (down 9% MoM) respectively. The domestic CV industry sales degrew by ~4% YoY (up 6% MoM) mainly due to lower LCV and MHCV goods carrier volumes being partly set off by high industry volume for buses. The 3W domestic wholesales for Bajaj grew by 16% while TVS/M&M de-grew by 4%/3% YoY respectively. The tractor industry witnessed 3%/28% YoY/MoM recovery in volumes respectively.
PV - A Mixed bag: In Jun'24, the Passenger Vehicle Original Equipment Manufacturers' (PV OEMs') domestic wholesales (proxy) grew by 5% YoY but degrew 3% MoM. Maruti Suzuki India Limited (MSIL) entry-level car segment declined by ~8% YoY, while the SUV segment grew by ~21% YoY, resulting in total PV sales growth of ~12% YoY (with domestic sales up 6% YoY). The total domestic sales remained robust across Toyota, Kia, and M&M with 41%/10%/23% YoY growth while MG/Honda/Tata Motors de-growth of 9%/5%/8% YoY respectively and Hyundai volumes were flat on a YoY basis.
CV- Buses grows gradually: Our proxy for Commercial Vehicles (CV) - domestic dispatches degrew by 4% YoY but was up 6% MoM. Tata Motors, M&M, Ashok Leyland, MSIL degrew by 8%, 2%, 1%, 8% while VECV grew by 7% YoY respectively in Jun'24. For CVs, we anticipate low single-digit growth in FY25E by various OEMs due to the high-base effect, low fleet capacity utilization, and moderate replacement demand in the Medium and Heavy Commercial Vehicle (MHCV) truck segment. Bus volumes grew 8%/18% YoY for Ashok Leyland/Tata motors respectively.
2W sales-witness YoY domestic volume growth: 2W domestic dispatches (excl. HMSI) grew by 11% YoY but declined by 3% MoM. Hero/TVS/Bajaj/Suzuki grew 16%/8%/7%/13% YoY while RE degrew 2% YoY. Exports for the industry witnessed a ~4%/9%YoY/MoM degrowth. Factors favoring the 2W domestic demand momentum are (i) Pent-up Rural demand and (ii) New Model Launches. A revival in exports in FY25 will be critical for Bajaj, TVS, and RE.
Recovery seen in the tractor industry: Our proxy for Domestic tractor industry sales (Exhibit 2) in Jun'24 saw 3% volumes growth on a YoY basis and ~28% growth on a MoM basis. On the back of low reservoir water levels and heatwaves in certain regions of the country, we hold a cautious view on the segment. However, with anticipation of above-average monsoons in the H2FY25 and continuing government support ( such as increase in MSP), we expect demand recovery to be gradual.
On a medium-term outlook, we prefer 2W OEMs over PV, Tractor, and CV space. We continue to prefer TVS and Hero Motocorp in the 2W segment; M&M (soft coverage) as a play in PV/CV/tractor segment.
2W/3W Segment
TVS Motors' total 2W sales were ~3.34 Lc units in Jun'24, up ~5.4% YoY (down 9.8% MoM). 3W sales were down ~4.4% YoY but up ~11.2% MoM at ~11.5k units respectively. TVS iQube sales stood at ~15.9 K units, up ~10% YoY but down 15% MoM.
Bajaj Auto sold ~3.04 Lc 2W units in Jun'24, up ~3.4% YoY (down 0.6% MoM).
Hero Motocorp (RE) sold a total of ~5.04 Lc units of 2W, up 15%/1% YoY/MoM respectively.
PV & CV Segment
Maruti Suzuki posted total sales of ~1.79 Lc units, ~12.4%/2.7% YoY/MoM. The domestic sales were up ~6% YoY but down 6% MoM respectively.
Mahindra's Auto division grew 11.5% YoY (down 3% MoM) to ~66.8k units. Its PV segment witnessed a growth of ~23% YoY (down 7.4%) to 40K units while the 3W segment degrew by 3% YoY (up 3.6% MoM).
Tata Motors reported total sales of ~75.6K units, down ~7.4%/1.5%% YoY/MoM. The domestic CV sales were down ~8% YoY (up 8% MoM) to ~30.6K units; domestic PV sales declined by ~8%/7% YoY MoM to ~43.5K units.
Ashok Leyland reported total sales of ~14.9K units, down ~2% YoY but up 2% MoM. The domestic MHCV segment degrew by ~2.4% YoY; up 5.9% MoM and the domestic LCV segment grew 2.4% YoY but down 1.7% MoM respectively.
Eicher Motors(VECV) reported total CV sales of 7.4K, up 10.6%/7.6% YoY/MoM.
Tractor Segment
M&M reported total tractor sales, up ~6.4%/27.5% YoY/MoM to ~47.3K units.
Escorts Kubota Limited sold ~9.6K total tractors, down ~2.6% YoY but up 11% MoM. The ECE segment saw the sale of 440 units (down ~10% YoY but up ~0.2% MoM respectively). |
