Auto Players Deliver Mixed November Performance—What Lies Ahead?

The Indian automobile sector showed varied trends in November 2024, as fresh data revealed moderate growth across most categories, with distinct performances in different segments. The data points to a continued recovery in key sectors, particularly passenger vehicles (PVs) and commercial vehicles (CVs), while two-wheeler (2W) growth faced headwinds, especially in electric vehicles (EVs). Analysts from Nomura, Emkay, Nirmal Bang, and BNP Paribas have weighed in with detailed insights into these trends, highlighting both the positive and negative forces shaping the market.

Emkay Research's November update paints a positive picture for passenger vehicles and tractors, while signaling challenges for electric two-wheelers.

• Two-Wheelers: TVS continued to outperform, posting a 6% domestic growth, while Royal Enfield's sales also showed strength in exports, up 34%. However, overall two-wheeler wholesales were affected by post-festive inventory correction, with notable declines in domestic sales for players like Hero and Bajaj. The electric two-wheeler sector, especially Ola, saw a 15% MoM drop, with penetration falling to 4.6%, the lowest level in the past year.

• Passenger Vehicles: Emkay highlighted strong wholesales growth for Mahindra & Mahindra (M&M), with a 16% increase in domestic volumes, while Maruti Suzuki (MSIL) also saw a 10% rise. MSIL’s SUV sales stood out, with 20% growth in its SUV category. Emkay pointed out that retail growth was solid, but some challenges may arise in the coming months as inventory levels remain elevated.

• Commercial Vehicles and Tractors: Emkay also noted positive trends in the commercial vehicle space, particularly in medium and heavy commercial vehicles (MHCVs) from Tata Motors and Ashok Leyland, which saw low single-digit growth. Tractor sales for M&M rose by 2%, despite a festive mismatch.

Emkay maintains a favorable outlook on two-wheelers, particularly on a relative basis, and anticipates a potential upcycle for commercial vehicles and tractors starting in the second half of FY25.

Nirmal Bang's analysis similarly pointed to a strong performance in exports, particularly for two-wheeler exports, while domestic sales in the segment faced moderation after the festive season.

• Two-Wheelers: While domestic 2W volumes declined due to the high base effect from last November’s festive sales, exports surged, particularly for Royal Enfield, which saw a massive 96% growth YoY. Other players like Hero and TVS also saw strong exports growth. In contrast, Ola's market share fell significantly to 24.5% as its EV sales moderated, while TVS saw 57% growth in its EV segment.

• Passenger Vehicles: The UV segment remained strong, with MSIL seeing robust UV sales up 20.4% YoY, while Mahindra's UV sales also showed solid growth. M&M's new electric SUV models, including the BE6e and XEV9e, are expected to further drive EV adoption. Nirmal Bang also highlighted MSIL’s increasing volume supply to Toyota, noting a strong 80% YoY increase.

• Commercial Vehicles and Tractors: While CV sales showed mixed performance, Nirmal Bang noted a positive surprise in the export market, particularly for MHCVs from Ashok Leyland and Volvo Eicher. Tractors, meanwhile, continued to show healthy YoY growth of 20%, with an optimistic outlook for rural income improvement and Rabi crop expectations.

Nomura's take on November data highlighted a broad recovery in the PV segment, while the two-wheeler and tractor segments experienced more moderate growth.

• Passenger Vehicles: The PV market saw a 5% increase YoY, in line with Nomura's expectations, with MSIL seeing steady domestic sales growth. Mahindra's UV sales showed a 16% YoY jump, bolstered by its expanding EV lineup. However, Nomura noted that while wholesales showed strong growth, retail sales were lower, impacted by high discounting.

• Two-Wheelers: Nomura estimated overall two-wheeler growth at just 1%, falling short of their initial 3% growth expectation. Domestic sales were sluggish, impacted by the post-festive inventory correction, but exports showed strong performance, especially for TVS, which outperformed the segment.

• Tractors and Commercial Vehicles: Nomura's estimates for the tractor segment came in lower than expected, with just 2% growth. Commercial vehicles saw a slight improvement, with MHCV sales up 3% YoY, although still below Nomura’s expectations. They anticipate a recovery in both CV and tractor sectors in the second half of FY25.

BNP Paribas focused on the performance of specific companies and segments in November.

• Passenger Vehicles: Maruti Suzuki stood out, with strong domestic and export sales. MSIL’s total sales grew by 10.4%, driven by its UV segment (+20.4%) and a notable 79.6% increase in sales to Toyota. Mahindra's UV sales were robust, up 15.6%, though its overall growth was slightly moderated compared to previous months. The company also saw growth in tractor shipments, with a 4% YoY increase.

• Commercial Vehicles: The CV segment faced challenges, with Ashok Leyland’s CV sales declining by 4.3% YoY, despite a recovery in MHCVs. Exports for the company showed positive growth, up 63% YoY. Tata Motors and Volvo Eicher also showed muted performance in the domestic CV space.

• Two-Wheelers: Royal Enfield saw a notable 96% increase in export sales, while domestic sales declined 3.9%. Overall, exports played a significant role in the performance of many two-wheeler manufacturers, offsetting weaker domestic sales.

The Indian auto sector continues to recover, with notable gains in passenger vehicles, particularly SUVs, and in exports across most segments. However, there are challenges in the two-wheeler market, especially for electric models, as well as in the commercial vehicle space, where the recovery remains tentative. The outlook for FY25 remains cautiously optimistic, with significant growth potential in exports and for electric vehicles, especially as OEMs roll out more EV models in the coming months.