Automobiles Sector Check - Weakness In Rural Demand Persists; Urban Better Off: Motilal Oswal

Motilal Oswal Report

Our interactions with leading channel partners indicate that there is a slight slowdown in enquiry levels during the month on a sequential basis. However, retails are expected to grow at 8-12% YoY across segments.

Driven by a healthy uptick in the urban markets, coupled with the marriage season in northern regions (20-25% of total demand in key states such as Uttar Pradesh and Bihar), two-wheeler demand has slightly improved in Feb-23. This is expected to drive 10-12% YoY growth in retail volumes.

Passenger vehicle retails are expected to grow 6-8% YoY. There has been an 8-10% drop in the enquiries across original equipment manufacturers, which is expected to result in a sequential volume decline for the month.

However, overall sentiments are still positive as booking trends remains healthy. Our channel checks suggest commercial vehicle volumes to grow 11-13% YoY during the month.

Demand perceptions were mixed as we observed a decline in demand from segments such as agriculture, while demand from other industries remained stable.

While tractor retails are expected to grow at 10-12% YoY, we expect the same to decline 7-9% month-on-month. Due to sluggish cash flows in some regions and the anticipation of severe effects from this year's heatwaves, the mood in the agricultural sector has been down of late.

Overall, in February 2023, wholesale volumes for PV/CV/two-wheeler/tractor/three-wheelers are estimated to grow at 5%/ -4%/ 1%/17%/14% YoY.

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