The automobile sector is back to 88% of pre-Covid levels

The Indian automotive industry is expected to record strong growth in FY23, post recovering from the effects of the COVID-19 pandemic. According to estimates from 2021, India’s automobile sector is the fourth largest in the global automotive industry, with a current market value of more than $ 100 billion, accounting for 8% of the country’s total exports and 2.30% of GDP. Players in the Indian automotive industry include many home-grown brands as well as some of the leading international players vying for a share of their pie in this vast automobile market.

Moreover, India is also a major exporter of finished vehicles to the Middle East and Asia, and it is anticipated that this will continue to be a significant source of income for the country’s automobile sector. Lately, the automobile sector shares resumed their uptrend, Nifty Auto index hit an over 5-month high ahead of June sales data. All automobile segments barring tractors and two-wheelers were expected to post strong YoY growth in June, largely on a low base in 2021, when India was battling a devastating second COVID wave. Now that the sales figures have been released, almost all automobile companies listed on the NSE have reported robust growth in domestic as well as exports of 4W & 2W in June 2022. Let’s have a look at sales data of the top 10 four-wheeler and top 6 two-wheeler manufacturers in India.

Hyundai regained its 2 nd position back in June 2022

The sales data for the month of June 2022 has been made public by car manufacturers. Maruti Suzuki recorded a tiny 5% increase over the 1,47,368 units it sold in June of the previous year. The automaker sold a total of 1,55,857 vehicles last month. Hyundai Motor Company of South Korea has revealed its June 2022 sales figures. Hyundai India has been focusing on stable over growth in recent months. But June 2022 appears to be a different story. In May 2022, Hyundai lost the No. 2 spot to Tata Motors in domestic sales, which they regained in June 2022. Moreover, Hyundai sold 49,001 vehicles in June 2022 against 40,496 in June 2021. However, in terms of exports, Hyundai sold 13,350 vehicles in June 2022, a marginal decrease from the 13,978 vehicles in June 2021.

Tata Motors reported car sales of 45,197 units in June 2022 in the domestic market. This was an 87.4% YoY growth over the 24,110 units sold in June 2021, while MoM sales increased by 4.2% over the 43,341 units sold in May 2022. This was the highest ever monthly PV sales registered by Tata Motors. Despite being their highest ever, it was not
enough to maintain the No 2 position in the Indian car industry.

While Renault India posted 9317 units sales against 6,100 units in June 2021 with a YoY increase of 52.7%. Honda Cars India slotted in at eighth position with 7,834 units against 4,767 units during the same period in 2021, with a YoY sales surge of 64.3%. Skoda managed to finish in the ninth position with 6,023 units versus 734 units in June 2021, MG recorded a YoY sales increase of 51.4 %with the sale of 4,503 units With the exception of Bajaj Auto (a 3W company) and Renault, the rest of the 4W manufacturers have seen positive YoY growth in their monthly sales figures for June 2022.

Bajaj Auto sold 31,056 4W in June 2022, compared to 36098 4W in June 2021, and Renault sold 6,100 in June, compared to 9317 in the same period last year. One of the reasons for Bajaj’s low demand was the recent discontinuation of its CT100. While demand for motorcycles is increasing, Bajaj Auto dealers appear to be among the hardest hit due to massive supply constraints.

4W Automobile Sector share: Maruti retains its leadership position

Maruti Suzuki, the market leader in the 4W segment, was able to maintain their position. While Hyundai overtook Tata Motors in domestic 4W sales, it still trails Tata Motors in total sales (domestic + exports). “Our SUV portfolio contributed 68 percent of Q1 FY23 sales. Electric vehicle sales attained new heights with quarterly sales of 9,283 in Q1FY23 and the highest-ever monthly sales of 3,507 units in June 2022, “Tata Motors Passenger Vehicles Ltd and

Tata Passenger Electric Mobility Ltd Managing Director Shailesh Chandra said.” “Despite the global supply chain constraints, we are still managing to achieve milestones in record time,” Kia India Vice President and Head of Sales and Marketing Hardeep Singh Brar said in a statement.

Two-wheeler sales figures give proof of the growth of the Indian automotive industry

Post Covid, the automobile sector is once again on the road to recovery thanks to the pandemic’s softening effects and a rise in manufacturing. This can also be inferred from the fact that the volume of two-wheeler sales has been rising overall.

“The growth expectations with which we set out in the beginning of FY23 is gradually turning into a reality.” The timely arrival of the monsoon has impacted the economic indicator favourably,” Atsushi Ogata, Managing Director, President and CEO of Honda Motorcycle and Scooter India, said. Let’s analyse sales data of two-wheelers in June 2022.

Honda Motorcycle saw the highest growth in 2W sales in June 2022

The demand for 2W is increasing QoQ in Q1FY23. However, it is still significantly below pre-COVID levels. This has mostly been driven by the recovery of rural demand, which has accelerated in areas with strong crop yields and farmers who have seen strong returns on their investments. The opening of schools and colleges throughout India was another factor driving demand that was mentioned by the dealers.

Hero MotoCorp, which is seeing a market share revival in many regions across India, is the single biggest beneficiary of both of the aforementioned factors. Supply constraints have impacted both Bajaj and TVS’s 125cc and above portfolios. While TVS’ diverse mix has helped to mitigate some of the impact, Bajaj Auto Limited appears to be the worst hit, as its contribution in the 125cc and above segment is significantly higher than that of listed peers.

Royal Enfield’s supply constraints have significantly eased, and all of their models are now available at most dealers with minimal waiting time. Furthermore, India is a major exporter of two-wheelers worldwide, with monthly exports in the lakhs. As a result, the graph shows that all two-wheeler manufacturers experienced strong YoY growth in 2W sales in June 2022. While Bajaj Auto leads the 2W export market, it is followed by TVS and Hero MotoCorp.

Now, to see whether these players have consistent growth in sales in FY23, Let’s have a look at their YoY growth percentages for total & exports sales in June 2022.

Conclusion

India’s automobile sector is a significant exporter of automobiles and anticipates rapid export development in the near term. By 2026, it is anticipated that a number of initiatives by the Indian government and important automobile manufacturers will position India as a global leader in the two-and four-wheeled vehicle markets.

Furthermore, the demand for and sales of electric vehicles, particularly electric cars, are anticipated to develop quickly throughout the projected period due to the increased focus on increased fuel efficiency and decreased exhaust emissions. For market participants, Insufficient charging infrastructure and the high price of electric vehicles could present additional difficulties. Even ICICI Direct, in their latest report, has given a “Buy” rating to TVS & Hero MotoCorp, calling them the best stocks in automobile sector for investing in the long term.

 

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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