Sector Update | 28 July 2017
Automobiles
2W retails recovering post initial GST hiccups
Rural growth recovering on positive sentiment due to timely rain
We interacted with leading 2W mass market channel partners from Andhra Pradesh,
Gujarat, Karnataka, Maharashtra and Rajasthan to understand and assess the demand
recovery post GST.
Most 2W channel partners indicted gradual recovery in retail demand from the second
half of July. Our interactions indicate that TVSL, HMSI and HMCL are growing better
than BJAUT in retails.
Factors such as good monsoon and increase in MSPs have lifted sentiment in
rural/semi-urban areas. Pre-festive demand is evident in states like Maharashtra and
Gujarat.
Channel partners have indicated pre-festive inventory building driving wholesale
demand.
Floods in Rajasthan and Gujarat are impacting demand in a few regions. Launch of
Vahan-4 is halting vehicle registration in few districts of Gujarat.
Retail sales improving MoM post initial GST hiccups
Retail demand on the ground is showing gradual recovery in the last couple of weeks
due to normalization of GST-related anxiety. Further, pre-festive demand beginning
with Ganesh Chaturthi in Maharashtra followed by Navratri and Diwali should drive
volumes. Currently, in key states such as Rajasthan, Andhra Pradesh, Maharashtra
and Gujarat, our interactions suggest retail growth of 5-7%. This is expected to inch
up to 10-12% in subsequent months, led primarily by festive demand.
YS Guleria, Sr VP,
Sales and Marketing
HMSI, said
“Post GST, the first 10 days of July
were a little slow because the
consumer was out in the market
and trying to find out what kind of
benefit had really been passed on
to them and then comparing the
prices being offered by the various
two wheeler makers.”
TVSL, HMSI and HMCL witnessing better retails than BJAUT
TVSL, HMCL and HMSI are witnessing better retail demand growth of 5-8% YoY,
while BJAUT’s retails are relatively stable YoY (as its portfolio is urban focused).
Jupiter
and
Apache
are leading TVSL’s growth, while
Activa
is the sole demand driver
for HMSI. HMCL is also recovering market share in key traditional markets like
Rajasthan. One of the largest HMCL dealers indicated 15-20% retail sales growth in
Rajasthan, led by conversion of pent-up demand in the last six months due to
regulatory impact. And 7-10% incease in price realizations of key crops like mustard
and onion.
Vahan 4 impacting registrations in Gujarat; however, demand intact
Our interactions with few channel partners in Gujarat indicated slower retails YoY, as
registration of vehicles is stopped in districts like Surat due to implementation of
Vahan 4 (flagship e-governance application under national transport project). The
government is planning Vahan 4 implementation pan India in the subsequent month
and plans to abolish the existing RTO system. Demand should bounce back in the
subsequent month, as underlying demand drivers are intact.
Jinesh Gandhi - Research Analyst
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Deep A Shah - Research Analyst
(Deep.S@MotilalOswal.com);+912261291533/
Jigar Shah - Research Analyst
(Jigar.Shah@MotilalOswal.com);+912239825402
8 August 2016
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Investors are advised to refer through important disclosures made at the last page of the Research Report.