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September wholesales a cause for optimism



a car parked in front of a building: The sharp recovery in wholesales in recent months has also set the stage for a turnaround in performance for auto companies in Q2.


© Provided by The Financial Express
The sharp recovery in wholesales in recent months has also set the stage for a turnaround in performance for auto companies in Q2.

Indian auto industry witnessed strong pick-up in wholesale volumes in September led by gradually improving retail demand and inventory build-up ahead of the upcoming festive season. Based on OEM volumes, we estimate PVs grew 28-30% y-o-y, 2Ws rose 11-13%, tractors were up 15-17% while M&HCVs declined just 16-20% y-o-y. The sharp recovery in wholesales in recent months has also set the stage for a turnaround in performance for auto companies in Q2.

The strong y-o-y numbers were also boosted by a low base. Among covered OEMs, Sept wholesales were up 31% y-o-y for MSIL, 10-17% for HMCL/BJAUT, 1-4% for TVSL/EIM (Royal Enfield), but fell 1-5% y-o-y for MM/AL.



chart, waterfall chart


© Provided by The Financial Express


We estimate PV industry wholesales rose 28-30% y-o-y in Sept (YTD: down 36% y-o-y) – this was the second consecutive month of double-digit y-o-y growth after two weak years. Maruti’s domestic wholesales grew 32% y-o-y.

2Ws wholesales rose 11-13% y-o-y (YTD: down 38%) -first double digit growth in almost two years.

Domestic 2W volumes were up 16-24% y-o-y for Bajaj and Hero, 10% y-o-y for Honda, 2% for RE but declined 1% for TVS. We estimate that M&HCVs wholesales declined just 16-20% y-o-y in Sept (YTD: -76% y-o-y). LCVs continue to do relatively better. Tata’s domestic CV volumes fell 4% y-o-y while Ashok’s wholesales were down 5% y-o-y.

We estimate tractor wholesales grew 15-17% y-o-y (YTD: c.9%). Tractor companies have said sentiment is strong on the back of good monsoons, higher crop sowing and government support. Indian auto companies faced severe volume pressures in Q1FY21. Q2 should be markedly better as the ongoing volume recovery should drive better top-line as well as margins.

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