There were divergent wholesale trends across auto segments in December with flattish y-o-y volume across PVs, tractors & LCVs, strong growth in 3w and continued weakness in 2w, MHCVs due to weak demand, inventory de-stocking. This reflects similar trends in all of Q3FY20 when PVs recovered sharply to flattish y-o-y growth vs. -25% in 1H, tractors, LCVs & 3w also reported some improvement while 2w & MHCVs remained weak, with inventory de-stocking a key factor in 2w.
Flattish trend in PV continues: PV growth in December remained flattish, similar to Q3 when better festive demand, traction in new launches and relatively lower inventory levels have helped. Maruti’s domestic sales was up 2% y-o-y helped by strong growth in UVs (+18% y-o-y) and mini + compact (+13% y-o-y) which were offset by sharp decline in vans (-52% y-o-y) and mid-size/Ciaz (-62% y-o-y). Interestingly Hyundai reported 10% y-o-y decline likely due to some impact on sales of Creta from Kia-Seltos and MG-Hector. For Q3, PVs and Maruti reported flattish volumes, a sharp improvement over -25% y-o-y decline in 1H and -30% decline in Q2.
Sharp double digit decline in 2-w: 2w sales disappointed with 13% y-o-y decline in December and for Q3 though we note that inventory de-stocking has been a factor across the quarter and retail trends have been better particularly during the festive season in October. Bajaj & TVS underperformed with over 20% decline in domestic volume in December; Eicher’s sub-50k domestic volumes also disappointed. Suzuki continued to outperform with flattish y-o-y sales while Hero surprised positively with only 6% y-o-y decline.
Sharp decline in MHCVs continue; LCVs flattish: Sharp decline in MHCVs continued as demand for trucks remains weak though there was improvement in buses for both AL and Tata Motors. LCV growth was flattish across all key players as divergence between it and MHCVs continues to play out.
Strong growth in 3w, partly helped by low base: 3w growth surprised positively up 21% y-o-y led by Bajaj (+26% y-o-y). Low base of last year helped as reflected in 8% 2-year CAGR decline.
Flattish trend in tractors led by M&M: Tractor growth was flattish in December led by 4% y-o-y growth for M&M. In Q3 tractors have declined 6% y-o-y vs. 12% y-o-y decline in 1H.
Q3FY20: Sharp improvement in PVs; 2w, MHCVs remain weak: December trends reflect trends across all of Q3 when PVs reported sharp improvement vs. 1H, tractors, LCVs & 3w also reported some improvement while 2w and MHCVs remained weak though we note that inventory de-stocking is likely to have been a key factor for 2w.