November Auto Volumes May See CVs In An Uptrend, Decline in Others

Emkay Global Financial Services conducted a channel check to gauge the volumes' estimate for the month of November. Commercial Vehicles (CVs) should maintain positive momentum in November 2021. Passenger Vehicles' volumes are likely to be hit by the chip shortages, though volumes should be slightly better MoM. 2-Wheelers and Tractors are likely to decline due to the moderation in rural demand and high base effect on account of pent-up demand last year. The festive season has been subdued for Passenger Vehicles, 2-Wheelers and Tractors.

Emkay Global retains a positive view on the auto sector, underpinned by expectations of a cyclical upturn in the next three years. The brokerage house is positive on Tata Motors (target price: Rs 550), Ashok Leyland (Target price: Rs 160), Maruti Suzuki (TP: Rs 8,750) and Hero MotoCorp (TP: Rs 3,700). In ancillaries, they like Motherson Sumi (TP: Rs 300), Bharat Forge (TP: Rs 950) and Ramakrishna Forgings (TP: Rs 1,530).

CV industry volumes are expected to improve, aided by demand for ICVs, Tippers and some replacement demand for MAVs. Emkay Global expect domestic volume growth of 23% YoY for Eicher Motors, 11% for Tata Motors and 2% for Ashok Leyland. In comparison, M&M is likely to see a 19% dip as chip shortages affect dispatches.

2-Wheeler industry volumes are likely to be lower than last year due to the moderation in rural demand and high base effect on account of pent-up demand last year. In addition, the chip shortage has affected dispatches of premium motorcycles, especially for Eicher Motor-Royal Enfield. It expects domestic volumes to decline by 24% yoy for Eicher Motor-Royal Enfield, 20% for Hero Moto Corp, 15% for TVS Motors and 10% for Bajaj Auto.

PV industry volumes should fall due to supply-related challenges, though volumes should be slightly better on a sequential basis. Emkay estimates domestic volumes to grow by 39% Yoy for Tata Motors and 2% for M&M, while it expects a decline of 15% for Maruti Suzuki. Production is expected to further improve ahead on better chip supplies. Discounts remain low considering robust order-book.