Why auto stocks are trading flat today despite strong May sales

Auto shares were trading flat today despite the market players posting a strong set of sales numbers for May 2022. Analysts cited the flat movement in stocks due to the low base effect. Sales of the auto industry were severely hit by the Covid lockdown in May 2021. Hence, sales numbers in last month are not comparable on a year-on-year basis.

The stock of Maruti Suzuki was trading 0.47 per cent lower at Rs 7,900 in the afternoon session. It closed at Rs 7,937 in the previous session on BSE.

India's largest car manufacturer sold 161,413 cars in May 2022. Total sales included domestic sales of 128,000 units, sales to other original equipment manufacturers (OEM) of 6,222 units, and its highest ever monthly exports of 27,191 units.

The stock of another auto major Tata Motors was down 1.3 per cent to Rs 438.90 against the previous close of Rs 444.70 on BSE.

Tata Motors sold 43,341 units last month, up 185 per cent over 15,181 units sold in May 2021. The company's MoM sales also increased 4.22 per cent over 41,587 units sold in April 2022.

Auto sales in May 2022: Tata Motors sets new records, M&M and MSI see sales grow

Arun Agarwal- Deputy Vice President, Kotak Securities said, "In May 2022, most auto manufacturers reported yoy and Q-o-Q increase in their wholesale dispatches. On a Y-o-Y basis, growth was high due to a low base (May 2021 volume were impacted due to covid related disruptions). For the passenger vehicle segment, strong demand was partly offset by supply-chain-related issues. Domestic two-wheeler industry volumes increased over April 2022 benefiting from the wedding season. Commercial vehicle segment remained on a strong footing and we expect the medium & heavy commercial vehicle segment recovery to continue."

Similarly, shares of TVS Motor were down 0.22 per cent at Rs 736.25 against the previous close of Rs 737.90 on BSE. The two-wheeler major sold 3,02,982 units in May 2022, rising 81 per cent from 1,66,889 vehicles sold in May last year.  

Deepak Jasani, Head of Retail Research, HDFC Securities shared a different insight on the movement in auto stocks today. "BSE auto index was up 4.1% over the past 4 sessions till yesterday. This rise was in anticipation of monthly auto numbers. Markets work on principles of buy on expectation and sell on news."

Shares of Mahindra & Mahindra (M&M) were also trading flat in the afternoon session today. The stock gained 0.14 per cent to Rs 1,049 against the previous close of Rs 1047.50 on BSE.

Mahindra & Mahindra logged sales of 53,726 vehicles for May 2022, around 208 per cent growth against the same period last year. The company stated that in the Utility Vehicles segment, it had sold 26,632 vehicles as against 7,748 units in May 2021, up 244 per cent.

Pavitraa Shetty, Co-founder & Trainer, Tips2Trades said, "Despite strong YoY performance of all the major auto companies in terms of sales growth, poor rural demand, higher inflation leading to lower margins have massively impacted the auto sector since the past 3-4 years. Across the board, including two-wheeler companies, the auto sector has been growing at low single-digit numbers indicating a strong slowdown in especially rural demand. Even considering a lower base effect due to the lockdown years, compounded sales of all the major auto companies have been poor even as compared to pre-Covid levels with deteriorating margins."

Shares of Ashok Leyland were down 0.07 per cent to Rs 139.90 against the previous close of Rs 140 on BSE. However, the Hinduja group flagship firm's commercial vehicle sales zoomed four-fold to 13,273 units in May 2022. The firm had managed to sell 3,199 units in May last year. The company's domestic sales rose to 12,458 units, as against 2,738 units in May 2021.