Auto sales preview: PVs, CVs to remain on course but two-wheeler volume may suffer

Auto companies are scheduled to report sales data for February from Tuesday onwards.

“Our recent industry and dealer interactions indicate that retail demand has remained subdued, especially in two-wheelers (2Ws). Passenger vehicle (PVs) sales have been improving, with improvements in chip supplies,” said analysts at Nomura.

“However, the demand seems to be skewed towards CNG and new launches, where supply constraints have been impacting sales. We have been concerned about the weakness in mass segments. We believe a potential rise in fuel prices in March-22 could increase downside risks to our estimates.”

Analysts are envisaging a Rs 8-10 per litre fuel price hike as soon as ongoing assembly elections are over. There has been an unofficial ban on fuel price hike in India for over three months now.

PVs: Improvement in volume

Analysts expect PV volume to improve sequentially, led by easing supply constraints. Brokerage house Nirmal Bang said it expects the PV segment to recover faster on the back of easing lockdown restrictions, sustained demand, low inventory levels and high waiting periods.

CVs: Ashok Leyland to emerge as winner

Commercial vehicles are another segment that is seeing positive traction. Analysts see the volume momentum continuing as the underlying demand drivers remain intact albeit rising fuel prices remain a pain point. Further improvement in freight utilization (as economic activities gather pace) and stable demand from infra and construction sector should support demand for CVs in the coming months.

“Improving freight rates continue to benefit fleet operator profitability. Industry retail sales could be up 20 per cent yoy in Feb 2022, on our estimate,” said Nomura, adding it expects Tata Motors to report 4 per cent yoy growth, while the same for Ashok Leyland and Eicher Motors will likely be up 12 per cent and 6 per cent, respectively.


2W: Volume to take a plunge

Analysts are observing 2W dispatches improving slightly on MoM basis but they will remain muted on YoY basis due to weak consumer sentiments. Though a gradual opening up of educational institutes, offices etc, and upcoming marriage season can support the demand going ahead.

Tractors: Moderating growth

Coming on high base, the sales growth for tractors may see a drop. Though analysts said rural sentiments are relatively strong and a good rabi crop should augur well for the tractor industry in the coming months. “The growth momentum could be restrained by the peaking tractor demand cycle,” said Nirmal Bang.