Auto sales September 2022: Continued strength in PV/CV volumes

4 Oct 2022 , 10:39 AM

PV industry grew 90% YoY (chip-shortage in base) and 8% MoM. MHCV SAAR in September 2022 stood at 340k, and is higher than IIFL Capital Services’ FY23 volume estimate (325k, +35% YoY). LCV SAAR came in at ~615k, above IIFL Capital Services’ FY23 estimate (600k, +25% YoY).

Analysts at IIFL Capital Services estimate 2W wholesales to have grown ~10% YoY, which is underwhelming given the easy base. The lack of strength may be explained by recent softness in some of the key rural markets. They estimate tractor wholesales to be up 22% YoY. Tractor YoY wholesale growth was high, artificially inflated by early festive inventory filling this year. They expect this to reverse in coming months.

MHCV, LCV growth stays strong
In September 2022, MHCV industry grew about 38% YoY, and 25% MoM. MHCV SAAR stands at ~340k in the month, higher than IIFL Capital Services’ FY23 volume forecast of 325k. Ashok Leyland, which lost share during April-December 2021 (25% MHCV share), improved to ~30% share in January-August 2022, clocking 34% share in September 2022. LCV industry grew 45% YoY. Current LCV SAAR of 615k implies upside to IIFL Capital Services’ current forecast of ~600k (+25% YoY).

PV industry set to meet or beat IIFL Capital Services’ 25% growth estimate

Analysts at IIFL Capital Services estimate PV industry volumes to be up 90% YoY and 8% MoM (chip shortage in YoY base). They estimate Maruti’s market-share at about 42%, which is lower than its FY22 full-year market share of 43.5%. Tata’s market share stood at ~13.5% versus 12% in FY22. M&M has seen sharp ramp-up in UV volumes to ~34k units (versus average monthly volume of ~19k in FY22 and 27k in April-August 2022).

Tractors up 22% YoY, due to inventory filling; expect reversal in October

Analysts at IIFL Capital Services estimate tractor industry volumes to be up 22% YoY. They understand underlying retails have been declining in recent months. However, an earlier festive calendar in 2022 led to tractor OEMs pushing inventory into dealerships earlier this year versus 2021. Analysts at IIFL Capital Services expect this to reverse in October 2022.

Two wheelers — Growth is underwhelming due to weakness in rural markets

Analysts at IIFL Capital Services estimate two wheeler wholesales to have grown ~10% YoY and MoM. This is relatively soft in the context of an easy base (17% decline in September 2021) and an earlier festive season this year versus 2021. Volumes are weaker for Hero than for the rest of the industry. Analysts at IIFL Capital Services believe this is explained by weakness in some of the rural markets and hence, in motorcycles more than scooters. If the rural sentiment doesn’t improve in the festive season, there is a risk of lower wholesales in the post-festive period, as companies would be forced to cut down inventory.

Auto OEMs — Volume Summary

OEMs	Sep 21	Aug 22	Sep 22	% YoY	% MoM	FY23E growth	Implied rate for the rest of FY23
Maruti Suzuki	86	165	176	104%	7%	19%	165
Hero Motocorp	530	463	520	(2%)	12%	14%	469
Bajaj Auto	402	402	395	(2%)	(2%)	1%	377
M&M- Autos	28	59	64	129%	9%	42%	55
M&M- Tractors	40	22	49	21%	126%	6%	27
Ashok Leyland	10	14	18	84%	24%	34%	14
Tata Motors	59	79	83	40%	5%	32%	82
Eicher Motors- 2 wheelers	34	70	82	145%	17%	30%	64
TVS Motor	347	334	379	9%	14%	13%	303
Escorts	9	6	12	39%	100%	4%	8

Source: Company, IIFL Research; Note: All absolute volumes are in 000s
E: Estimated

Domestic auto industry volume trend and FY23 growth expectations

Segment	Mar 22	Apr 22	May 22	Jun 22	Jul 22	Aug 22	Sep 22E	FY22 growth	FY23E growth
PVs	323	293	294	323	341	328	355	13%	25%
2 Wheelers	1,184	1,149	1,239	1,296	1,366	1,537	1,689	(11%)	15%
MHCVs	41	24	25	27	25	24	31	50%	35%
LCVs	56	44	52	53	51	50	52	17%	25%
Tractors	73	89	82	94	55	53	113	(6%)	5%

Source: Company, IIFL Research; Note: Absolute volumes are in 000s
E: Estimated