Automobiles: Dec-21 Channel Checks, Sustained Demand Momentum In PVs

In Dec'21, wholesale volumes are estimated to decline by 12% YoY for 2Ws and Tractors, Motilal Oswal institutional Equities has said in a report.

Passenger vehicle volumes are estimated to grow by 7% YoY as semiconductor availability slowly improves. CV wholesales remain flat YoY due to a higher base (LCVs to decline by 6% and M&HCVs to grow by 5%) and 3W to grow by 18% on a lower base.

"Demand for 2-wheelers continues to remain tepid in both urban and rural pockets. Fear of the new variant of Covid (Omicron) is only worsening the weak demand. Attractive finance scheme launched by HMCL has not been able to garner interest yet. Inventory in the system is around 60-75 days (based on current retails). In passenger vehicles, sequential improvement in the supplies from the OEMs was visible in Dec-21. Waiting period for key models of most of the OEMs in 1-2 months average, whereas inventory is at 15-20 days," Motilal Oswal Institutional Equities has said.

In CV, cargo segment is showing sequential improvement due to increased freight availability. Infrastructure demand is led by spending due to government projects.

Financing is not a constraint; however financiers are neither easing out credit norms nor increasing the LTV. LTV continues to remain range bound at around 85-90% for large operators. Demand for the tractors is weak in seasonally weak period. Year-end discounts are not able to attract the customers since recent price hikes are playing spoilsport. Inventory is at 30 days but OEMs are focusing on correcting inventory.