The festive season in India which began on Sunday with the first day of Navratri is expected to drive growth for auto retails. However, there were mixed wholesale trends in Q2 FY2024, albeit rising for most of the segments says a BNP Paribas report.
It finds that while three-wheeler sales volume continued to recover sharply YoY, those of PV and CV grew in mid-single digits, driven by the M&HCV segment. The two-wheeler and tractor segment volume declined by low single digits YoY.
BNP Paribas report states that its proprietary commodity index further cooled off on QoQ basis in Q2 FY2024, with some uptick in recent months. “The consumer confidence is showing an improving trend.”
The report highlights that with a strong quarter of volume growth (except two-wheeler and tractors), the company sees operating leverage and healthy product mix at play. It also sees companies reporting mixed or in line results vs consensus expectations. The key factors to watch out for will be the demand (rural, festive) and cost pressure in H2 FY2024.
BNP Paribas says it is bearish on two-wheelers and expects structurally low growth, muted festive season, EV disruption and increasing competition to hurt the sector’s profitability. It prefers passenger and commercial vehicle OEMs and global auto-focused names to do well as they have better prospects for sales growth and margin in the upcycle, especially with disciplined pricing trends.
