Auto Sector Update

Volume's accelerated in March, Strong ending to FY11

Auto volumes across-the-board continued their show of strength in Mar’11 (typically a strong month), despite some pre-buying in Feb’11 in anticipation of duty hikes. Discounts offered by various OEMs also aided sales. FY11 has been a record year for the entire automobile sector with a consecutive robust volume growth of ~25%.

• 2Ws: Hero Honda recorded highest ever vols of 0.51 mn units in Mar’11 (up 9% MoM & 24% YoY). However, BAL’s sales were muted at 274,389 units, down 4% MoM (up 12% YoY) due to export vehicles still in transit. TVS’ 2W volumes witnessed a healthy 8% MoM growth to 186,781 units (up 27% YoY).

• CVs: TAMO and ALL saw highest ever CV vols of 49,753 (up 21% MoM & 15% YoY) and 12,168 (up 24% MoM & 21% YoY) units resp. 

• Cars: Maruti saw record sales of 121,952 units, up 9% MoM (up 28% YoY); while Tata Motors’ passenger car volumes fell by 16% MoM to 23,130 units (down 3% YoY), led by 31% MoM decline in Indica sales. Nano clocked 8,707 units (vs. 8,262 units in Feb’11).

Maruti Suzuki (MSIL): Target - 1603

• MSIL clocked its highest ever volumes of 121,952 units in Mar’11 (up 9% MoM, 28% YoY). Domestic sales were higher by 9% MoM at 110,424 units (up 39% YoY), with a strong showing across all segments. Exports too improved by 14% MoM to 11,528 units (down 26% YoY).

• Maruti has raised prices by upto Rs 9,000 (upto ~2.4%) across models in Apr’11, to absorb the material cost pressures.

• The management expects the industry and Maruti volumes to grow by ~12-15% in FY12E (vs. 25% in FY11)

Mahindra and Mahindra (M&M): Target - 745

• M&M’s UV volumes (incl Gio + Maxximo) grew by 15% MoM to 27,822 units (up 15% YoY). 3W sales were steady at 5,769 units (up 32% YoY; 1% MoM). Logan volumes continued to be healthy at 1,018 units in Mar’11 (vs. avg. of 1,136 p.m. in Jan & Feb). The company recorded its highest ever auto segment volumes in Mar’11.

• Tractor volumes rose by 4% MoM to 19,848 units, up 4% MoM (23% YoY).

• M&M is currently running at ~85% utilization levels for tractors and expects strong volume growth of ~12-15% for FY12E. The company has announced a greenfield expansion plan for tractors (capacity addition of 0.1 mn units), which is expected to commence operations by Feb’12.

Tata Motors (TAMO): Target - 1501

• Tata Motors witnessed highest ever domestic CV volumes of 49,753 units in Mar’11, higher by 21% MoM (15% YoY).Domestic M&HCVs rose 32% MoM to 23,338 units (up 12% YoY), while LCVs at 26,415 units were up 12% MoM and 18% YoY.

• However, passenger car volumes fell by 16% MoM to 23,130 units (down 3% YoY) – led by 31% MoM decline in Indica sales. Nano clocked 8,707 units (vs. 8,262 units in Feb’11).

• TAMO is planning to double its Nano production to ~18,000–20,000 p.m. units in FY12E, in light of the revival in Nano sales over the last four months.

• The company has raised prices by Rs 7,000-36,000 in Apr’11 across passenger vehicle products.

Ashok Leyland (ALL): Target - 63

• ALL witnessed overall volume growth of 24% MoM and 21% YoY at 12,168 units, which is its highest ever.

• Goods segment volumes rose 22% MoM to 9,296 units (up 25% YoY); while passenger segment saw a 28% MoM jump in sales at 2,728 units (7% YoY).

• The company expects overall volume growth of ~15% in FY12E (vs. 47% in FY11 at 94,108 units), also to be aided by market share gains.

• ALL is planning a round of price increase in Apr’11.

Two-Wheeler Industry

Bajaj Auto (BAL): Target - 1570

BAL’s motorcycle volumes were down 4% MoM at 274,389 units (up 12% YoY). Three-wheeler sales stood at 33,349 units (down 17% MoM, up 14% YoY). The volume decline is on account of ~32,000 units of exports in transit, which will be recorded in Apr’11 sales. As a result, exports too were lower at 69,884 units (vs. avg. of 0.1 mn p.m. in the last 3 months). Bajaj has launched the 125 cc variant of the Discover brand at a competitive price of Rs 45,500 on March 31st, 2011. The co. has raised prices by ~1-1.5% across models in Apr’11.

Hero Honda (HH): Target - 1642

HH has reported strong volumes of 515,852 units in Mar’11 (up 9% MoM and 24% YoY); this is its highest ever monthly run-rate. The company’s market share (among top 3 players) increased to 59% this month (vs. 57% in Feb’11 and Mar’10).

TVS Motors (TVS): Target - 63

TVS’ motorcycle vols improved by 11% MoM to 79,642 units (up 24% MoM), while scooter sales remained healthy at 42,655 units, up 6% MoM (50% YoY). Mopeds clocked 64,484 units (up 5% MoM, 19% YoY). Exports have surprised positively, with a 24% MoM growth to 26,979 units (up 34% YoY). TVS has met its full yr volume guidance of 2 mn units in FY11, and expects growth of ~15% in FY12E. The co. is planning to hike prices in Apr’11.