In June, dispatch volumes across OEMs and segments were mixed as dealers and companies reduced inventory levels ahead of GST changeover. Companies have also adjusted prices for the new tax regime, which has resulted in a 0.5-3% price cut across most products, in some cases prices have risen. With inventory adjustment in June, we expect July volumes to be a better reflection of underlying demand. In June, 2W wholesale volumes appear to be strong despite the recent BS4 changeover and inventory adjustment. Within PVs, Maruti Suzuki continues to outpace the overall industry trends with no discount change, while other OEMs have increased discounts in June to boost retail volumes. We continue to prefer Mahindra (M&M), Tata Motors within the sector, both rated Buys. Wholesale volumes were strongest for Royal Enfield (+25% y-o-y, Hero MotoCorp (+14% y-o-y), TVS Motors (+11% y-o-y) and Honda (+4 y-o-y). On the other hand, Bajaj Auto (-23% y-o-y) had tepid growth for the month. We note that some OEMs , Royal Enfield, Bajaj, had reduced prices and passed on GST benefits in June prior to GST rollout, most OEMs have lowered prices by 0.5-3% post GST implementation.
While prices/ incentives have been lowered marginally, our channel checks are not showing signs of widespread discounts for the industry. The recovery in 2W demand, especially mass market products, is reflective of a broader recovery in demand.
Our channel checks indicate discounts across most OEMs barring Maruti and Hyundai had increased in June and should trend down in Jul/Aug. For June, wholesale dispatch trends were relatively stronger for Maruti Suzuki at 1% y-o-y growth, while Hyundai volumes were down 6% y-o-y.
Tata Motors domestic volumes were down 10% y-o-y, M&M were down 1% y-o-y, while Toyota reported 85% drop in volumes y-o-y. In June, Medium & Heavy commercial vehicle (M&HCV) dispatches for Ashok Leyland were up 6% y-o-y while Tata Motors reported growth of 2%. Dispatches were driven by ramp up in production of BS4 products and increased demand for 37-tonne and 49- tonne vehicles. Dispatches appear to be normalising after the impact of the BS4 changeover, which has resulted in a limited impact from GST given the low industry inventory levels.