Commercial Vehicles Growth Positive In Aug, Tractors Muted: Emkay

Emkay Global Financial Services conducted a channel check to gauge the volumes' estimate for the month of August. The channel checks indicate a similar trend witnessed in the month of July 2022. Commercial Vehicles are likely to maintain positive growth momentum. Further, PV volumes should be higher, due to the large order book and increase in production. In addition, 2-Wheeler volumes would improve due to inventory build-up with dealers in the run-up to the festive season. The tractor volumes are likely to decline due to muted sentiment, on uneven spread of monsoons and lower sowing acreage. Emkay Global retains a positive view on the auto sector, Maruti Suzuki, Tata Motors, M&M, Escorts and Ashok Leyland are their top pick.

"Commercial Vehicles should uphold the uptrend, with robust growth in the passenger & cargo segments. The e-way bill trend indicates better freight availability compared with last year. Emkay Global expects positive growth at 126% YoY for M&M, 54% for Ashok Leyland, 29% for Eicher Motor-Volve Eicher CV and 26% for Tata Motors in the domestic market. The channel checks indicate that Ashok Leyland is gaining share in MHCVs, buoyed by aggressive marketing efforts and new products," Emkay Global has said in its report.

Passenger Vehicles should witness robust growth, on account of a large order book and production ramp-up. Among OEMs, we estimate domestic volumes to grow by 75% YoY for M&M, 66% for Tata Motors and by 36% for Maruti Suzuki. The volume tally for M&M and Maruti Suzuki would further pick up in Septmeber 2022, with commencement of dispatches of new products (Scorpio-N for M&M and Vitara for Maruti). Vehicle discounts have increased MoM, but remain significantly lower than the elevated levels seen in the past.

2-Wheeler volumes are expected to improve, owing to festive demand (Ganesh Chaturthi and Onam) and inventory buildup with dealers. The research house expect domestic volumes to improve by 59% YoY for Eicher Motor-Royal Enfield, 19% for TVS Motor, 17% for Bajaj Auto and 9% for Hero Moto Corp Ltd. Eicher Motor-Royal Enfield volumes would be robust, on strong response to new model Hunter, given order-bookings of >25,000 units.