November auto sales preview: PV demand remains strong, 2Ws may put up a muted show

As automobile manufactures, across segments, are readying their data sheets to announce the November sales figures on Thursday, December 1, analysts sound gloomy, forecasting a decline in the numbers on a monthly basis.

The likely fall in November figures compared with the October data can be attributed to the end of festive season and buyers’ tendency to skip purchases in the month to grab the best of deals in December, when most auto companies offer major discounts.

Brokerage firms have found that demand for passenger vehicles (PVs) was quite firm amid new launches, whereas two-wheelers (2Ws) and tractors are likely to take the biggest hit. Commercial vehicles may report a flat to marginally lower sales.

On a yearly basis, the sales are likely to remain strong in November, led by PVs reporting a strong performance. Other segments will also remain firm. However, the demand for entry-level cars is expected to remain muted.

Emkay Global Financial Services conducted a channel check to gauge the volume estimate for November. The channel checks indicate higher volumes for PVs largely due to their large order books.

“Further, CVs and 2Ws are likely to maintain their positive growth momentum. In comparison, tractor volumes are likely to be muted on inventory destocking with dealers,” it said.

Global brokerage firm Nomura's dealer survey suggested weak demand in the entry car segment. “Waiting periods have come down for SUVs as well, as per our dipstick survey. We estimate an inventory addition of 45-50k cars in November.”

Emkay's top picks in the OEM space include Maruti Suzuki, M&M, Ashok Leyland, TVS Motor and Escorts. Nomura prefers OEMs with strong model cycles driving market share gains, such as M&M, TVS Motors and Ashok Leyland.

Rising electrification and content per vehicle will be the key value drivers for suppliers, said Nomura, which remains positive on Sona BLW, Uno Minda and Sansera.

Another brokerage firm Motilal Oswal said retail demand for 2Ws was reasonable in November. However, wholesale growth remains relatively lower due to the destocking after the festive season.

“The rise in interest rates has influenced overall CV demand, with flattish retail sales MoM. However, the overall demand sentiment appears positive as fleet utilisation is still over 75%,” said the brokerage.

It prefers 4Ws over 2Ws with strong demand as they offer a stable competitive environment and expects the momentum in the CV cycle to continue.

“We like companies with a higher visibility of a demand recovery, a strong competitive positioning, encouraging margin drivers, and a strong balance sheet,” it added, making Maruti Suzuki and Ashok Leyland as its top picks.

Echoing similar views, JM Financial said demand continues to remain healthy for PVs led by a strong response to new and recent launches. It has picked Maruti Suzuki from the PV segment and Eicher Motors and TVS Motors from the 2W space.

2W demand remains mixed in the entry-level segment with premium segment faring better, led by new launches, it added. “Consumer offers in PVs increased post-festive and range between Rs 20 and 25k mainly for slow moving models," JM Financial said.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)