CV and tractor segments should have a strong run going forward given the government’s focus on the rural economy in an election year and its continued investment in infrastructure.
Automobile players clocked strong volumes in May. Robust performance was seen in all segments primarily because of a lower base due to transition from Bharat Stage (BS) III to BS-IV emission norms and Goods & Service Tax (GST) led destocking. This former led to pre-buying and consequently smaller demand in May 2017 while the latter affected sales. Factors like expectation of a normal monsoon, improved rural sentiment and investment in infrastructure are leading to strong demand for commercial vehicles (CV) and tractors. The government’s decision to end Permit Raj and a pick-up in exports on the back of a global revival led to a revival in three-wheeler (3W) sales.
CV and tractor segments should have a strong run going forward given the government’s focus on the rural economy in an election year and its continued investment in infrastructure. Strong two-wheeler (2W) numbers continue to support this uptrend and could receive some additional support if the revival in the rural economy continues to gather momentum in coming months.
Strong showing by CVsThe commercial sector has bounced back strongly after the disruption caused by transition to BS-IV that largely affected the transport industry and GST-led destocking. The light commercial vehicle (LCV) segment cooled off in May as compared to the growth witnessed in the last two-to-three months. This segment, however, continues to be in strong uptrend primarily because of the government’s increased thrust on agriculture, fast moving consumer goods (FMCG) and e-commerce sectors and increasing demand for container and refrigerated trucks.
Tata Motors registered a significant growth on the back of increasing demand from construction, logistics, e-commerce and FMCG applications. Volumes in the medium and heavy commercial vehicle (M&HCV) truck segment continued to remain robust on the back of stringent restrictions on overloading, replacement buying and various infrastructure projects. Demand for higher tonnage trucks and tippers continues to remain strong.
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Ashok Leyland continued to post strong year-on-year (YoY) growth at 51 percent in May. Mahindra & Mahindra (M&M) posted healthy growth thanks to its rural penetration. The management expects the growth momentum to continue on recent refresh launches as well as better performance of its product portfolio. Eicher Motors (Volvo) also witnessed a significant 29.4 percent YoY growth in May.
Market leader, Maruti Suzuki, continued to top the chart in the passenger vehicle (PV) segment with 23 percent YoY growth. During May, PV segment grew 25.4 percent whereas the utility vehicle (UV) segment grew 13.4 percent YoY.
Tata Motors’ PV segment witnessed a 17.6 percent growth YoY on the back of strong demand for Tiago and Tigor. UV segment saw significant 463 percent YoY growth, thanks to the strong demand for its Nexon AMT, a recently launched compact sports utility vehicle (SUV).
M&M continued to struggle as it posted a 1.6 percent YoY growth in passenger vehicle (PV + CV) segment. The management said response to the recently launched Plush New XUV500 has been encouraging.
In the two-wheeler space, Eicher Motors witnessed strong YoY sales growth in both bike categories: below 350cc (23.3 percent) and bikes above 350cc (20.7 percent). Hero MotoCorp, yet again, posted 11.4 percent YoY growth in May. The management said with forecast of a normal monsoon this year and strong new product pipeline, the company is confident of sustaining its growth momentum going forward.
Bajaj Auto saw robust YoY growth in domestic 2W sales while TVS Motor Company witnessed a meagre 8 percent growth, driven by a 11.9 percent growth in the scooter segment.
The overall 3W market continues to gain strength after the end of the Permit Raj in Maharashtra and new permits in Delhi. Bajaj Auto, the leader in this space, could capture growth in this segment and posted a whopping 83.1 percent YoY growth in the domestic 3W segment. TVS also saw a strong 78.2 percent YoY growth in 3W volumes.
Revival in the rural economy and expectations of a normal monsoon are impacting numbers in the tractor segment as is evident in the stellar showing of both M&M and Escorts. The latter continues to post significant growth (20.9 percent YoY) and M&M saw a healthy 13.9 percent growth.
The government’s recent rural initiatives should continue to support demand for farm equipment like tractors.
