Auto December 2017 sales analysis: Growth exaggerated by base effect

Auto sales in December 2017 were sharply higher year-on-year, but that’s partly because sales in December 2016 were impacted by demonetisation.

However, we believe in the durability of the emerging trends: strong growth in commercial vehicles (CV) because of good monsoon, improved rural sentiment and increased production of BS IV compliant vehicles; signs of revival in three-wheeler sales following government’s decision to end permit system and revival in exports due to improving global economy.

We feel most regulatory headwinds are weakening and the situation has returned to near normal. Good monsoon, rural demand and government’s capex push are the tailwinds that will drive growth in the sector.

Commercial Vehicle (CV) – Significant growth

The commercial sector has bounced back strongly after setbacks from  demonetization and the BS-IV transition in 2017.

Tata Motors’ reported strong sales number as its innovative Selective Catalytic Reduction (SCR) has been liked by customers. SCR helps reduce diesel engine emissions. Growth in consumption-led sectors like e-commerce, and infrastructure spending by the government funding, along with superior performance of new products increased demand for the new tonnage vehicles,

M&M reported good growth (on a low base) thanks to near normal monsoon, and rural presence of the company. The management expects the growth momentum to continue on the back of some recent refresh launches as well as the better performance of its product portfolio.

Eicher Volvo also witnessed a significant growth of 50.9 percent (Y-o-Y) during December.

Ashok Leyland continue to post strong growth (79 percent YoY) on the back of the low base, good monsoon, and improved rural demand.

Cars Segment – leader continued its mojo

The leader, Maruti, continued to top the chart in PV (passenger vehicle) segment with 10 percent growth, mainly driven by 20 percent growth in UV (utility vehicle).

For Tata Motors, passenger car segment witnessed a strong growth of 31 percent (Y-o-Y) on the back of 406 percent growth in its UV segment, led by strong demand for new generation cars.

Mahindra and Mahindra’s (M&M) passenger vehicle sales declined 7.5 percent year-on-year.

Two-wheeler (2W) segment: TVS is gaining momentum

In two-wheeler space, Eicher continued its dream run, with sales of sub-350 cc bikes growing 20 percent. Sales of 350 cc-plus bikes fell 20.4 percent year-on-year, a trend for the past few months baring October.

TVS posted a strong growth in 2W segment primarily because of 63.7 percent growth in bikes and 50.6 percent growth in scooters. Bajaj’s domestic two-wheeler sales were flat.

Hero, a formidable player in 100/110cc bikes, posted a significant growth of 43.2 percent in the month, however, the December volume was way below the monthly run rate of more than 6L units seen for the last many months.

Three-wheeler (3W): the leader posted strong numbers 

The overall three-wheeler market is showing significant improvement as is evident from the sales number for the December month. This is primarily due to the end of “Permit Raj” in Maharashtra and new 10,000 permits in Delhi. Bajaj Auto, the leader in the space, could capture the growth coming in this segment and posted a whopping 180.1 percent (Y-o-Y) growth in the domestic 3W segment.

TVS also posted a strong growth of 72.1 percent (Y-o-Y) in 3W volumes whereas Atul Auto continued to face challenges and witnessed a growth of 13 percent (Y-o-Y) in 3W volumes.

Tractors: gaining on the back of good monsoon

M&M continue to post significant growth (30.2 percent y-o-y) on the back of healthy monsoon, higher Kharif production and improved minimum support price (MSP) for farmers. The management believes that with the healthy reservoir levels and good progress on rabi sowing, the growth momentum is expected to continue in the coming months.

Escorts also posted a healthy growth of 14.2 percent.

Exports: early signs of improvement

Auto Companies had been struggling in the export markets for long. However, going by the monthly numbers, there appears to be signs of recovery. TVS and Bajaj yet again witnessed a strong growth in their exports. Eicher witnessed a significant growth of 48 percent. Escorts and Maruti struggled in the export market during December.

Bajaj Auto’s performance was on the back of stabilizing currency and retail sector in Nigeria. The management also mentioned that the geographies like Philippines, Latin America, Egypt, East Africa, and Nepal have stabilized. The management believes that the company is on track to achieve 1.5 lakh units of exports per month for the rest of year.

Tata Motors seems to have come out of its problems in export market as it posted a growth of 26 percent.

本文來源：http://www.moneycontrol.com/news/business/moneycontrol-research/auto-december-2017-sales-analysis-growth-exaggerated-by-base-effect-2474313.html