Hero MotoCorp chairman Pawan Munjal urged the government to reduce goods and services tax (GST) on bikes and scooters from 28% to 18% as it could provide relief to two-wheeler customers across the country.
The Nifty auto index on Wednesday ended 2.92% lower at 8,914 points on weak December 2018 sales figures. Auto makers attributed macro-economic conditions for reporting a decline in off take during the month.
On Wednesday’s trade, Eicher Motors (-9.4%) was the biggest loser in Nifty auto index followed by TVS Motor Company (-5.23%), Mahindra & Mahindra (-4.24), Bharat Forge (-3.51%), Hero MotoCorp (-3.28%) and Tata Motors (-2.91%). “For Maruti Suzuki, we are lowering our FY19/20 volume growth estimates to 5%/10%. As a result, our consolidated EPS has seen a downgrade of 4-5% for FY19/20. In addition, Mahindra & Mahindra’s Dec’18 tractor volumes of 17,400 units were below our estimate of 20,000,” said Motilal Oswal in a report.
“In the domestic market, challenges relating to tight liquidity and low buying sentiment continue the de-growth for December. We hope to see good performance in Q4, owing to the anticipated rural demand because of the harvesting season,” said Rajan Wadhera, president, automotive sector at Mahindra & Mahindra (M&M).
With regard to weak sales figures of Eicher Motors, Motilal Oswal commented that the weakness in demand might continue in near future, considering the substantial increase in cost of ownership and Jawa emerging as a reasonable alternative for potential RE customers. Hero MotoCorp chairman Pawan Munjal urged the government to reduce goods and services tax (GST) on bikes and scooters from 28% to 18% as it could provide relief to two-wheeler customers across the country.
Sales of commercial vehicles of Bajaj Auto has declined 26% in December. The sales of Tata Motors commercial and passenger vehicles business in the domestic market dropped 8% to 50,440 units against 54,627. “Led by deferral in purchase due to the constraints in vehicle financing and the impact from an increase in axle load capacity, commercial vehicles sales remained weak in December,” said Motilal Oswal, in a report.
Analysts say that demand for passenger vehicles has recovered partially but remains weak for 2- wheelers and commercial vehicles. Due to this, inventory levels remain higher than the desired level for calendar year-end.
According to analysts, sale of commercial vehicles is expected to decline 10-12% y-o-y, primarily led by medium and heavy commercial vehicles segment. However, due to fall in the fuel prices, retail demand for passenger vehicles has improved compared to November 2018. Motilal Oswal has preferred PVs over 2Ws and CVs due to their stronger volume growth and a stable competitive environment.
“This quarter will be tough one for all auto companies as result season is approaching. Owing to weak sales, results are likely to be bad. Full-fledged new models are waiting for BS VI to come in. Historically, growth in auto segment has always been driven by new products. Now onwards, market will see a lot of downgrades. The first catalyst for stock prices to do well will be after January and February volumes. From February and March onwards, market could see some upsticks happening to auto stocks,” said an analyst from Axis Capital.