The domestic auto industry posted healthy double-digit volume growth in November 2017 across all automotive segments led by low base due to negative impact of demonetisation last year and a steady underlying demand environment. Maruti and Honda Motorcycles continued to outperform and gain market share in their respective industry segments. MHCV industry volumes grew by around 65% y-o-y which came as a positive surprise as underlying freight demand has been subdued post festive season, as per our checks.
As per our calculations, passenger vehicle industry volumes grew by 12-13% y-o-y in November 2017; the growth comes off a low base, industry volumes up 2% y-o-y in November 2016 due to the negative impact of demonetization last year. Maruti’s overall volumes increased 14% y-o-y to 154,600 units in November 2017 led by 15% y-o-y growth in domestic volumes while exports were largely flattish y-o-y. The company’s domestic volume growth was driven by 25% y-o-y growth in premium hatchback volumes led by strong demand for Baleno and new D’zire models and 34% y-o-y growth in compact SUV volumes driven by a ramp-up in the production of Vitara Brezza. Entry segment volumes declined by 2% y-o-y as the company faced production constraints. In terms of other OEMs, Hyundai’s domestic volumes increased by 10% y-o-y while Ford and Toyota reported13% y-o-y growth in domestic volumes. Tata Motor’s domestic passenger vehicle volumes increased led by the Nexon SUV launch.
Mahindra reported 23% y-o-y growth in overall volumes, driven by strong double-digit volume growth in both auto and tractor segments. Utility vehicle and LCV segment volumes increased 22% y-o-y largely due to a lower base, volumes were down 14-33% y-o-y in November 2016. The underlying demand in the tractor segment continues to remain strong; the company’s volumes rose 32% y-o-y in November 2017 and are up 15% y-o-y in FYTD18 so far. We reckon that the domestic MHCV industry’s volumes grew by around 65% y-o-y in November 2017. This has surprised us positively even though we were building in strong growth partly due to a low base as industry volumes were down 21% y-o-y in November 2016. We note that underlying freight demand and freight rates in the industry have dropped post the festive season; therefore, such strong volumes could partly be driven by inventory build-up, we will watch out for volume performance over the next few months.