Commercial and passenger vehicles volumes show strong demand momentum: Brokerages on March auto sales

The demand for the overall automobile segment is seen improving with the recent March auto sales numbers across sectors and categories such as two-wheeler, three-wheeler, commercial vehicles (CV), passenger vehicles (PV), and tractors, according to most of the brokerages’ reports. 

Improved freight rates and the government’s infrastructure push are aiding CV demand and it continues to grow on increasing economic activity and high-capacity utilization, Motilal Oswal said in its report on the Auto sector. 

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The commercial vehicle segment saw maximum growth in March 2022 sales on both month-on-month and year-on-year basis up to 55 and 43 per cent respectively as compared to other segments.  

In CVs, volume was supported by strong freight availability, increased activity in road construction, and a gradual pick-up in demand, Nirmal Bang said in a report, expecting a further sustained uptick in CV volume in the coming quarters as economic activities gather pace and financing issues/cash-flow constraints are ironed out. 

While in PVs, Nirmal Bang sees the demand momentum sustaining amidst new launches, growing preference for personal mobility, and improving consumer sentiments. Overall, the PV segment grew by 13 per cent YoY and around 4 per cent MoM. 

While the demand for PVs sustains, the improving trend in wholesales reflects an easing of supply chain issues, though the situation remains dynamic, Motilal Oswal said about category. 

In the two-wheeler (2W) category, 2W wholesale volumes declined on a YoY basis, but improved on a sequential basis due to end-of-the-year dispatches, the brokerage said, adding further that dealer inventory continues to remain at 60-75 days as per our channel checks.  

The two-wheeler volumes declined by 22 and 5 per cent for Hero MotoCorp and TVS Motors but grew 2.5 per cent for Royal Enfield. 

According to Nirmal Bang, entry segment 2Ws and Scooters were the worst affected, but expect rural sentiments to improve going forward and support 2W segment recovery. The premium 2W segment is witnessing better demand, largely led by new model launches. 

Motilal Oswal prefers auto companies with higher visibility in terms of demand recovery, a strong competitive positioning, margin drivers, and balance sheet strength. In this, Maruti Suzuki is the brokerage’s top OEM pick and among auto component stocks, it prefers Bharat Forge.