After the festival season has fueled an uptick in the sales of automobiles, the momentum is expected to have continued in January, says analysts. Automobile firms will reveal their January auto sales on Thursday.
Analysts from different firms expect an increase in an overall volume growth driven by strong performance both in year-on-year and month-on-month basis by the two wheeler sector.
“On wholesale volume, we expect 2W volume growth of ~15% driven by increasing demand for mobility and pick-up in the entry-level segment,” said Antique Stock Broking Ltd.
Compared to December, said Sharekhan, there should be a 6.5% growth in volumes in two-wheelers.
Overall auto sales is likely to be boosted by an improvement in domestic sales, said Antique Broking. It pointed out that domestic demand has improved due to more stability in incomes, which has led to better consumption.
Rural dealers are expecting big ticket announcements for the rural economy in the upcoming Union Budget in the union election.
Antique Broking cited better vehicle registration data from different states. “Retail registrations show decent demand across all regions. Entry segment 2W demand continues to show signs of improvement amidst changing preference towards the 125cc+ segment,” said the broker.
Much like in other segments such as the QSR, premium products are likely to continue to do well in automobiles.
Important players, such as Hero MotoCorp and Bajaj Auto, continue to launch new products in the light of a robust demand.
“Hero MotoCorp continuously launching new products motorcycle segment to strengthen its positioning in premium segment. After the successful launch of Harley Davidson 440, the company has introduced Maverick 440 in a roadster style. Along with that company has also introduced the Xtreme 125. Similarly, BAL has also planned for 2-3 model updates/ version per month for next 4-5 months and targets to launch the biggest Pulsar model by Q1FY25,” noted Sharekhan.
Coming to the EV segment in two wheelers, analysts observe that most of the major players in the game are seeking to expand their product portfolios.
“...all three legacy players (HCML, BAL & TVSM) are playing in EV segment via one brand, but it is expected that these legacy players would expand their product portfolio in EV segment as they have been continuously expanding their distribution network for EVs and have stabilized supply chains,” said analysts from Sharekhan.
Passenger Vehicles
The analysts are also expecting a favorable performance in terms of volume growth from the Passenger Vehicle (PV) sector.
Sharekhan expects its “domestic PV universe to register 26.9% growth in volumes on m-o-m basis.”
Meanwhile Antique expects a moderate single digit growth year-on-year, mainly in the SUV segment, boosted by new product launches.
“Our interaction with dealers indicate the outperformance of SUVs is continuing across brands, while MSIL dealers expect a gradual recovery in the entry-level segment demand as the income levels in Tier1 and 2 cities stabilize,” the broker said.
Analysts from Sharekhan also feel the same regarding the dominance of SUVs. They believe that the price hikes announced by prominent players in the market such as Tata Motors and MSIL, will only help the sector kick in.
“The demand in the PV segment has continued to skew towards the SUV segment and hence the rise in prices would be easily absorbed in the market and supports the profitability of OEMs,” said analysts from Sharekhan.
In addition, analysts from Antique expect the PV wholesale side to show better performance in January, considering the filling of new stocks in stores following the sweeping sales during the festive season.
At the same time, on the retail side also, traction remains strong, with “channel checks indicating strong traction in states like Gujarat, UP, and Rajasthan, while Maharashtra remains flattish,” noted the broker.
Commercial Vehicles
Coming to the commercial vehicle sector, both brokers expect mid-single-digit growth, with Sharekhan expecting “5.9% growth in volumes on m-o-m basis due to seasonality and limited uptick in first half of Q3FY24 due to state elections.”
“LCV demand is expected to recover gradually from hereon while dealers are cautiously optimistic on the same. Bus demand continues to remain healthy both from STUs, private operators, and educational institutes,” said analysts from Antique.
However, exports remain a challenge, observed the analysts, considering the turn of geopolitical events that has made commuting through the Red Sea difficult. This crisis has led to a rise in freight charges and thus delay in shipments which is affecting the export performance adversely.