Auto Sales Preview: Two-Wheelers Continue Recovery In February Led By Mass Segments

After years of muted sales, a recovery in sales of two-wheelers continued in February, led by higher sales in mass segments.

Two-wheeler industry wholesales are likely to see strong double-digit growth in February, helped by a low base, analysts said. Demand for two-wheelers at the retail level has also remained stable, they said.

Healthy momentum continues to be led by a recovery in mass segments and no price hikes in the past three months, after a series of quarterly increases in prices since 2020 will aid affordability, Nomura said.

Robust two-wheeler sales in February strengthened expectations of recovery in the sector, particularly in rural areas. This comes after a disproportionate rise in prices led to muted growth for years.

The brokerage also underlined good traction in the car segment but warned that more wholesales, compared with retail sales, pushed the inventory at dealerships further to a month.

Inventory stood at 30-35 days for Maruti Suzuki India Ltd. and 30 days for Mahindra & Mahindra Ltd. and Tata Motors Ltd., according to Motilal Oswal Financial Services Ltd.

Nomura sees upside risks to growth estimates of 6% and 10% for the passenger vehicle and two-wheeler industries in FY24, respectively.

In FY25, the volume growth for passenger vehicles may be softer than the estimated 6% and higher than 10% for two-wheelers, Nomura said.

Passenger vehicle sales growth was driven by higher dispatches of SUVs in February, while the entry-level segment continued to languish, said Motilal Oswal.

The waiting period for popular models has either remained stable or came down in February, with discounts inching up again after dipping in January.

In the commercial vehicle segment, sales are likely to remain weak with an expected slowdown in orders before elections.

Demand across underlying sectors, including cement, oil and gas, has remained weak and the tendering process is expected to pick up in Q2 FY25 once the new budget is announced, said Motilal Oswal.

While analysts are seeing signs of weakness in freight demand as well, discounts have remained stable.

The wholesales for tractors are also expected to continue their losing streak as cyclical weakness in demand persists.

Nomura said the wholesales are expected to remain soft as the Navratri season will fall in April, compared to March 2023.