Vehicle registrations were lower by over 70% yoy across segments, owing to Covid-19
lockdown. Apr’20 registrations were meager, at around 21,000 units for PVs, 314,000 units
for 2Ws, 19,000 units for CVs, 5,000 units for Tractors and 10,000 units for 3Ws (Source:
Vahan).
Wholesales were much lower than registrations, as dealers have been focusing on
clearing existing inventories, and OEM plants are yet to ramp-up operations.
PV, 2W, 3W and CV OEMs clocked zero volumes in the domestic market. In comparison,
tractor OEMs such as MM and ESC registered domestic volumes of 4,716 units (-83%
yoy) and 613 units (-88%), respectively, as dealers restarted operations from 20th April
onward.
Dispatches to overseas markets have been higher than that of the domestic market for
most segments, due to pending order-book and re-commencement of major ports in
Mumbai, Chennai and Mundra.
OEMs and ancillaries have received permissions and are working toward commencement
of operations at most of their plants. However, the ramp-up of plant operations for OEMs
would depend on supplies from ancillaries and labor availability.
Dealers are gradually re-commencing operations in Green and Orange zones, post
obtaining permissions from local authorities. In Red zones, most dealers expect to
commence operations from 18th May.
The auto sector has endured tough times over the past six quarters due to a cyclical
downturn across segments. Near-term volume performance is expected to remain
under pressure, but we expect a rebound in H2FY21, led by a low base, pent-up
demand and better rural sentiment.
We retain our positive view on the Auto sector at current valuations. Although
companies with global linkages are relatively more vulnerable, domestic-focused
ones are relatively less impacted and likely to witness an early recovery. Among
OEMs, we like Escorts, Maruti Suzuki and Eicher Motors. Among ancillaries, we like
aftermarket-focused companies such as Amara Raja Batteries and Exide Industries.
