Auto stimulus fell short of providing a material boost; retails in the festive season are key in the near term.
Amidst continued pain across auto segments, MHCV reported the sharpest decline of ~60% y-o-y as a result of channel de-stocking & weak retails. Maruti, PVs reported 30%+decline for second successive month—our channel checks suggest continued weak retails and higher discounts. Most 2W OEMs reported 20%+ volume decline with Suzuki continuing to outperform. Sharp improvement in monsoon has not yet showed in tractor wholesale, which continued to decline 16% y-o-y.
MHCV down-cycle strengthens
With both Ashok Leyland & Tata Motors indicating plans to de-stock during Q2 and our own channel checks suggesting weak demand particularly from smaller operators, the MHCV down-cycle gathered steam with ~60% y-o-y decline, with all key players seeing similar cuts. We maintain UNPF on Ashok Leyland noting MHCV down-cycles tend to be most painful with sharpest volume & margin cuts across auto segments.
Pain also showing in LCVs now
LCVs had outperformed in the initial phase of the current down-cycle, likely helped by strong structural tailwinds but the pain is now showing even here with 29% decline for the month and 13% decline for the year.
Maruti, PVs decline 35% y-o-y
PV wholesales declined 35% in August led by similar decline for Maruti and stronger cuts for Tata Motors (-58% y-o-y) and Honda (-51% y-o-y), both of which had outperformed last year, helped by new launches. Hyundai outperformed with 17% y-o-y decline, likely helped by launch of Venue. Media reports suggest 6.2k units of Kia Seltos sold in the month, but we would be cautious about reading too much into initial trends.
20% decline across most 2W OEMs
Most 2W OEMs reported 20%+ decline in volumes in August with similar decline across motorcycles & scooters. Suzuki continued to outperform helped by Access/ 125cc scooters.
Tractors down despite monsoon boost
Despite a sharp pick-up in monsoon and improved outlook for sowing, tractor wholesales continued to fall 16% y-o-y at least in August.
The auto stimulus announced recently fell short of providing a material boost in our view. The government has indicated plans for a scrappage policy. We remain skeptical of a large GST cut given fiscal constraints. Retails in festive season will be key in the near-term though wholesales are likely to remain weak regardless due to BS-4 destocking.