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Auto sales volumes: Not so encouraging...
Jun 24, 2015

Auto sales volumes in the year so far have not been very encouraging, thereby showing signs of a weakness. After a bad FY14, FY15 did not see a strong comeback as well. FY16 is expected to be an important year for the auto industry as such, considering the expectations from pent up demand. With half of the two-wheeler volumes and about a third of the passenger vehicles sales coming in from the rural parts of the country, managements of auto players are hoping for a good monsoon season to drive volumes this year.

Today's chart of the day shows the year on year change in sales volumes for the past two year and the first two months of the current fiscal across various segments.

If one was to look at the volumes of individual companies, the performance has been quite mixed with certain players completely outshining the industry. Well timed and successful product launches have been key reasons for the same. What is disappointing is that sales volumes of certain segments are still far behind their all time highs recorded a few years ago. For instance, in the passenger vehicles segment, sales volumes stood at 2.6 m in FY15; the highest annual sales volumes of 2.68 m units were clocked in FY13. In the CV space, the peak volumes were seen way back in FY12, with the same coming in at 348,000 units then. In FY15, the figure stood at 232,000 units.

As per us, notwithstanding the short term fluctuations, a good way to gauge the long term demand cycle of auto demand is by normalising the volume growth for each year (and each segment) and comparing the same to the actual volumes. If the latter shoots up way above the normalised line, then one could expect the volume factor to slowdown. The same would hold true in the vice versa situation as well.

Data source: Business Standard, SIAM

This Chart Of The Day was published in The 5 Minute WrapUp - Should you only buy Sensex based companies?

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