16 Sep 2022 , 01:03 PM
Analysts at IIFL Capital Services recently analyzed the vehicle registration data.
Here are the key takeaways from this deep dive:
Sequential deterioration in states with higher rural exposure
States with higher rural exposure have seen a sharp deterioration in volumes in recent months. The sharpest deterioration is seen in UP and Bihar. Vehicle registrations in UP are down 35% sequentially in September quarter versus June quarter. In Bihar, volume drop is 30% on a sequential basis. On the other hand, states with lower rural exposure (Maharashtra, Gujarat, Tamil Nadu, Karnataka, Kerala) are clocking stable volumes on a sequential basis. For these states, growth is also stable on a 3-year comparison (evening out COVID disruptions).
Hero volumes fall below Honda — this is a first
Two wheeler retails have softened from the highs of March-May. Part of this is seasonal due to marriage season in the aforementioned period. However, the fall in retail volumes is much higher in Hero (mainly exposed to motorcycles). In September 2022, Hero’s registrations have slipped below Honda (mainly exposed to scooters). Analysts at IIFL Capital Services believe this is explained by weakness in Hero’s key markets, rather than any structural shift in market share.
Tractors decline YoY on easy base
Demand for tractors have been quite weak in recent months. After YoY growth in the June 2022 quarter, registrations have declined YoY in July and August. In September, registrations are set to decline YoY, despite an easy base of 25% YoY decline in September 2021. Analysts at IIFL Capital Services understand that dealer inventory levels are higher than normal. If the YoY weakness continues in the upcoming festive season, they see downside risks to management guidance and street estimates.
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