Automobile industry looks poised for robust growth

By: | Published: May 4, 2018 2:43 AM

April 2018 was a strong month for the domestic automotive industry with robust volume growth across all segments. However, we note that growth has come off a relatively low base, particularly in the MHCV industry; therefore it should not be extrapolated going ahead.

auto, automobile, MHCVDemand in rural India seems to have picked up, which is reflected in strong demand for two-wheelers and tractors. All major OEMs have reported strong double-digit year-on-year volume growth in these segments. (Reuters)

April 2018 was a strong month for the domestic automotive industry with robust volume growth across all segments. However, we note that growth has come off a relatively low base, particularly in the MHCV industry; therefore it should not be extrapolated going ahead. Demand in rural India seems to have picked up, which is reflected in strong demand for two-wheelers and tractors. All major OEMs have reported strong double-digit year-on-year volume growth in these segments.

As per our calculations, passenger vehicle industry volumes grew by 8-10% year-on-year in April 2018 (two-year CAGR of 11-12%). Maruti’s overall volumes increased by 14.4% year-on-year to 172,986 units led by (1) 14.2% year-on-year growth in domestic volumes and (2) 19% year-on-year growth in exports. Domestic volume growth was driven by 32% year-on-year growth in premium hatchback/entry sedan segment volumes led by launch of new Swift and continued strong demand for Dzire and Baleno models. Entry segment volumes were down 3% year-on-year while SUV volumes were flattish year-on-year.

In terms of other OEMs, Hyundai’s domestic volumes increased by 4% year-on-year, Toyota’s volumes were flattish year-on-year while Honda and Ford reported volume decline of 37% and 3% year-on-year, respectively in April 2018. Tata Motors reported 34% year-on-year volume growth in the passenger vehicle segment led by the success of new launches — Nexon and Tiago. Mahindra reported 21% year-on-year overall volume growth led by (1) 22% year-on-year growth in the auto segment (two-year CAGR of 7%) aided by 26% year-on-year growth in LCV/pickup volumes and 13% year-on-year growth in UV volumes (on low base) and (2) 18% year-on-year growth in tractor volumes (two-year CAGR of 20%).

The underlying demand in the tractor segment remains strong, which was reflected in sales volume of Escorts as well. Escorts reported 26% year-on-year growth in tractor volumes in April 2018 (two-year CAGR of 23%).

We reckon that domestic MHCV industry volumes grew by more than 150% yoy in April 2018 albeit off a low base; two-year CAGR for the MHCV industry would be around 7% in April 2018. In the two-wheeler segment, Eicher reported 27% yoy volume growth to 76,187 units while TVS’ overall volumes grew by 24% yoy.

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