April ‘22 Auto Volume Preview: Tractors/2-Wheelers Likely To See recovery

Emkay Global Financial Services conducted a channel check to gauge the volumes' estimate for the month of April. The channel checks indicate a recovery in Tractors/2-Wheelers in April 2022. Apart from the low base of last year, Tractor volume growth is likely to be driven by improvement in farm income and some preponed purchases due to expected price hikes, while 2-Wheelers' growth should be supported by marriage/festive season demand. Amid global shortages due to the Russia-Ukraine conflict, Indian farmers are benefiting from better crop realizations. Further, dealer interactions indicate robust volumes in both CVs and PVs.

Emkay Global retains its positive view on the auto sector, underpinned by expectations of a cyclical upturn in the next three years. In OEMs, they are positive on Tata Motors, Maruti Suzuki and TVS Motors. In ancillaries, Motherson Sumi and Minda Industries.

Tractors are likely to see robust growth owing to improving retails and inventory filling by OEMs. Emkay expects domestic volumes to grow by 26% yoy for M&M and 11% for Escorts.

2-Wheeler's volumes are expected to improve due to marriage/festive season demand and the low base effect. Emkay expects domestic volumes to grow by 52% YoY for TVS Motor Lts, 21% for Eicher Motor-Royal Enfield and 21% for Hero Moto Corp Ltd. In comparison, they expect a 5% fall for Bajaj Auto.

CVs should remain in an uptrend owing to better demand for both passenger/cargo vehicles and the low base effect. The expectation is that the domestic volumes will grow by 138% yoy for Eicher Motor-Volvo Eicher CV, 87% for Tata Motor, 51% for Ashok Leyland and 35% for M&M.

PVs should witness robust growth on a low base. Among OEMs, Emkay estimates domestic volumes to grow by 59% YoY for Tata Motors and 50% for M&M, while they expect an 8% fall for Maruti Suzuki. Given the robust order book, discounts remain low in comparison to the previous year.