Automobile sales saw robust YoY growth in pre-festive season

This pre-festive period appeared to be a significant sales bump for automobile sales manufacturers. Most of them witnessed robust sales growth in September, fueled by pre-holiday season inventory build-up at dealerships, which boosted dispatches and enhanced car supply. In contrast to the two wheelers market, where motorcycle sales were sluggish, PV delivered uptick in sales in accordance with analysts’ predictions.

Automobile sales manufacturers either recorded the highest-ever monthly sales or shipments in several months. Whereas motorcycle sales in the domestic market were disappointing, and two-wheeler companies had dismal exports. Lastly, sales figures for the commercial vehicle and tractor segments were also above expectations, pointing to an even more prosperous festive season for businesses.

Let’s now take a closer look at the most recent automobile sales industry sales data for September 2022. To see the overall picture, we will consider both 2W and 4W numbers. Given that the vehicle industry has already been identified by a Univest report as one of the top-performing industries in 2022, let’s search for any potential investment opportunities among the listed businesses in this industry.

4W Segment: Double digit YoY & MoM growth in Sept’22

The boost in vehicle sales continued throughout September as Indian automobile makers expanded delivery to their dealer sites in anticipation of the Festive season. Industry analysts estimate that carmakers’ shipments grew from the previous year due to higher semiconductor supply, the start of the holiday season, and a lesser base impact.

Market leader Maruti Suzuki India Limited sold a total of 176,306 units in September, including 150,885 domestic sales, 4,018 sales to other OEMs, and 21,403 units exported. Its YoY growth was 179%, while its MoM growth was 6.7%. “The manufacture of automobiles, particularly domestic models, was only slightly impacted by the lack of electrical components. The corporation did everything it could to lessen the effects”, according to a statement from Maruti Suzuki.

With an 85% YoY increase in sales for its passenger vehicle division, Tata Motors also maintained its growth momentum. In September 2022, the domestic automaker recorded cumulative sales of 80,633 units, an increase from 55,988 units in September’21. Furthermore, it was able to hold onto its second-place market position above Hyundai.

The PV industry experienced robust demand during Q2FY23, driven by the holiday season and new releases, according to Shailesh Chandra, Managing Director of Tata Motors Passenger Vehicles Ltd and Tata Passenger Electric Mobility Ltd. He further added, “With sales of 142,325 units during the quarter, Tata Motors reached new heights in the passenger car market, growing by almost 70% from Q2FY22.”

Hyundai Motor India Ltd. recorded cumulative sales of 63,201 units last month, an increase of 38% over the 45,791 units sold in the same period the previous year. In September 2022, it sold 49,700 units in the domestic market, an increase of 50.2% YoY. Additionally, exports increased by 6.3% to 13,501 units from 12,704 previous year.

While Mahindra & Mahindra recorded overall sales of 64,486 units in September, which was a record-breaking month for the company. With 34,508 units shipped in the month, the company’s utility vehicle sales also hit a new high, propelling it to the top spot in the nation for SUV sales. This was Mahindra’s third highest-ever sales performance in three months in the SUV market.

In the meantime, Kia India reported 25,857 domestic PV sales in September 2022, which represented a 79% YoY increase. When the COVID-19 pandemic hit the local automobile sales sector in September of last year, the company had only sold 14,441 units in India.

Last but not least, Honda sold 8714 vehicles in September 22, representing a nearly 28.8% YoY increase over the 6765 vehicles sold in September 21. Honda was the only company to see a slow growth on a MoM basis as sales fell 13.9%.

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2W segment: Honda surpassed long time market leader in Sept’22 retail registrations

In September 2022, the Indian motorcycle powerhouse Hero MotoCorp produced 519,980 motorcycles and scooters. Sequentially, this equals an increase of 12.4% MoM over August 2022, when Hero had only sold 462,608 units. The sales figures that Hero computed in September 2021, however, show a modest decline in sales.

On October 7, 2022, the business plans to introduce VIDA – Powered by Hero, its first electric vehicle. Hero’s decision to make this step was crucial since the business wanted to firmly plant its roots in the 2W EV category, which is constantly expanding. Hero hopes to become a major EV player soon with the help of a US$60 million investment in California’s Zero Motorcycles, a cooperation with Gogoro, and Ather Energy.

Honda Motorcycle and Scooter India, sold 518,559 units last month, a 7.60% increase when compared to the 4,81,908 units sold in the same month a year earlier.. It should be mentioned that Honda has surpassed Hero MotoCorp, a former partner and competitor, in retail registrations for the month of September 2022. Hero, the largest two-wheeler manufacturer in the world by volume, has lost market share for the first time in years.

According to Vahan’s retail sales data, Honda registered 285,400 units last month, compared to Hero MotoCorp’s 251,939 units. Approximately 33,461 units separate the two producers. Please keep in mind that data on Vahan is updated frequently and takes into account the fact that 1339 of the 1441 RTOs in the nation lack vehicle registration information from Andhra Pradesh, Madhya Pradesh, Lakshadweep, and Telangana.

Among the top 2W players in India is TVS Motors. TVS is also a major player in exports. TVS Motor sold 3,61,729 units overall, up from 3,32,511 units in September 2021.

Domestic automobile sales manufacturer Bajaj saw a 28% increase in domestic two-wheeler sales in September 2022 compared to September 2021, selling 2,22,912 units instead of 1,73,945 units. Additionally, 1,25,443 two-wheelers were exported by Bajaj during this time, a decrease of 33% from the automaker’s two-wheeler shipments in September 2021, which were at 1,87,091 units. Bajaj sold 3,48,355 units in total in September 2022 (domestic + exports), a 4% reduction in growth from 3,61,036 two-wheeler sales in September 2021.

Last but not least, Royal Enfield, a motorbike manufacturer based in Chennai, published its sales for September 2022. The firm shipped 82,097 units, experiencing a two-fold gain of 145% year over year. In September 2021, in contrast, the company sold 33,529 units.

Our view

As the market sentiment currently appears slightly pessimistic, therefore investors are advised to hold onto their existing investments in the automobile sales stocks. While the festive season has started this month, many consider this as an opportunity to buy share of automakers, for decent short to medium term returns.

Therefore, Automobile sales stocks which are technically sound and have past record of giving returns in festive season can be considered right now as they are available at slight discounts. Few stocks to look at include TVS Motors & Eicher Motors in 2W segment. While for rest, a wait & watch approach would be highly preferable.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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