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Auto Volumes - June 2022: Sequential prints improve across major categories!!

ICICI Securities 03 Jun 2022

What's Buzzing

Wholesale dispatches for May 2022 came in steady with most segments witnessing sequential MoM growth. YoY comparison is redundant given the base month (May 2021) witnessed the impact of the second Covid wave. The tractor space, in particular, witnessed higher double digit YoY growth (30-48%) amid healthy crop realisations while growth was largely in high single digits in the PV (~8% MoM) & CV space (~10% MoM). The trend was mixed in the 2-W domain while the 3-W space witnessed green shoots amid economic recovery and reopening of schools & colleges.

Context

In the PV space, Maruti Suzuki sales volume jumped 7.8% MoM at 1.58 lakh units while volumes at Tata Motors were up 4.2% MoM at 43,392 units. More importantly, at Tata Motors, EV volumes were up 49% MoM at 3,454 and back at ~3500 run rate achieved in March 2022. In the CV space, market leader Tata Motors reported 6.4% MoM at 32,818 while Ashok Leyland led the CV space and reported growth of 12% MoM at 13,273. In the 2-W space, Hero MotoCorp reported higher double digit MoM growth (16.3% at 4.9 lakh units) benefiting from healthy rural income as well as marriage season. Bajaj Auto reported 11.4% MoM decline, impacted by chip shortages.

Our perspective

In the tractor space YoY growth was encouraging with M&M posting 48% YoY growth whereas the same at Escorts was at 31.1% YoY. The PV space continued to witness some headwinds of chip shortage. However, the outlook is encouraging in this domain amid strong underlying order-book and elongated waiting period across OEMs. The CV space, particularly in the bus and LCV space, reported healthy double digit MoM growth whereas M&HCV truck segment saw a muted performance. Retail volumes, as tracked by the Vahan database, also point to a smart recovery at ~94% of pre-Covid levels for May 2022. Total retail volumes for May 2022 totalled 16.5 lakh units, highest in the past six months. Going forward, we remain optimistic about demand in the PV and CV space amid need for personal mobility and revival in capex cycle (public as well as private).

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