Oct ‘21 Auto Volume Preview: Uptrend To Continue In CVs, Other Segments To Decline

Emkay Global Financial Services conducted channel checks to gauge the sentiment, automobile sales. Commercial Vehicles sales for the month of October is likely to maintain a positive momentum. Passenger Vehicles' volumes are likely to be hit by the chip shortages, though better on a sequential basis. 2-Wheelers and Tractors are likely to decline due to lower retail sales and high-base effect on account of inventory filling last year.

The festive season has been subdued for 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. It likes Ashok Leyland (Taregt price: Rs 155), Tata Motors (Target price: Rs 515), TVS Motor (Target price: Rs 800) and Maruti Suzuki (Target price: Rs 8,750) and in ancillaries, Motherson Sumi (Target price: Rs 300) and Ramkrishna Forgings (Target price: Rs 1,530).

Commercial vehicles

The commercial volumes are expected to improve, aided by healthy freight availability, better freight rates and pickup in construction activity. Channel checks indicate that volumes are aided by Tippers, ICVs and some replacement demand for MAVs. Emkay Global expects domestic volume growth of 52% YoY for Eicher Motor, 27% for Tata Motors and 24% for Ashok Leyland. In comparison, M&M is likely to see a 30% dip as chip shortages affect dispatches.

2 Wheelers

The 2-wheelers industry volumes are likely to be significantly lower than last year due to lower retail sales and a high base on account of inventory filling last year. In addition, the chip shortage has affected dispatches of premium motorcycles, especially for Eicher Motors-Royal Enfield. Emkay Global expect domestic volumes to decline by 14% YoY for TVS Motor, 26% for Bajaj Auto, 27% for HeroMoto Corp and 41% for Eicher Motor-Royal Enfield.

Passenger vehicle industry

The industry volumes should fall notably due to supply-related challenges, though better on a sequential basis. PV industry wholesale volumes are expected to decline 29% YoY, while increasing by ~30% MoM to 2,39,000 units. Retail volumes are likely to be higher than wholesale volumes by over 10%. Emkay Global estimates domestic volumes to decline by 8% for M&M and 39% for Maruti Suzuki. In comparison, Tata Motors remains an outlier with 23% growth. Production is expected to further improve in November 2021 on better chip supplies.