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Autos: The month that was... - Views on News from Equitymaster
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  • Feb 8, 2007

    Autos: The month that was...

    If January sales are any indication, auto companies, practically across all the segments have started calendar year 2007 in top gear. With macroeconomic fundamentals remaining strong, companies yet again notched up impressive volume growth. Let us have a look at the performance of all the segments and major companies within those segments during the month of January 2007.

      Jan-07 Jan-06 % change Apr-Jan 2007 Apr-Jan 2006 % change
    Two- wheelers*            
    Hero Honda 297,554 249,450 19.3% 2,778,326 2,477,744 12.1%
    Bajaj Auto 197,553 181,758 8.7% 2,056,194 1,660,280 23.8%
    TVS Motor 121,147 112,910 7.3% 1,280,343 1,110,544 15.3%
    Passenger vehicles (cars + UVs)            
    Maruti 62,248 48,526 28.3% 511,978 429,289 19.3%
    M&M 15,183 12,307 23.4% 103,160 93,347 10.5%
    Tata Motors 22,801 20,765 9.8% 179,811 148,275 21.3%
    Commercial vehicles            
    Ashok Leyland 9,096 5,618 61.9% 61,770 43,172 43.1%
    M&M 815 536 52.1% 6,902 5,768 19.7%
    Tata Motors 28,896 21,301 35.7% 240,594 164,770 46.0%
    * includes exports            

    Two-wheelers: After playing second fiddle to Bajaj Auto for quite some time now, Hero Honda started 2007 on a positive note as it emerged the fastest growing two-wheeler major during January 2007. Buoyed by its recent launches, the company's sales growth at 19% YoY were more than double of rival Bajaj Auto's, whose two-wheeler sales grew by 9% YoY. TVS Motor, the third largest player, continued to lag the big two as volumes during the month were higher by mere 7% YoY. Stung by recent loss of market share to Bajaj, Hero Honda had resorted to aggressive launches and the strategy now seems to be paying off as growth in motorcycles volumes exceeded the 12% YoY growth of the former. Hero Honda also achieved the distinction of being the largest two-wheeler company in the world for the sixth year in a row, in view of its 2006 sales performance. As far as TVS Motor is concerned, motorcycles sales remained flat and as a consequence, market share further took a beating.

    Passenger vehicles: In this segment, the month of January would go down as the month of 'highest ever' for all the three major players. In other words, all the three players recorded their highest ever sales in the month of January 2007. The leader of the pack however, continued to be Maruti Udyog, where domestic volumes were higher by 28% YoY. Not far behind was M&M, India's largest UV player. Here, backed by highest ever 'Scorpio' monthly sales, volumes grew 23% YoY. Tata Motors however could not cross the double-digit growth mark as growth at 9.8% fell marginally short. Nonetheless, it also managed to record highest ever-monthly sales of passenger vehicles. As far as growth drivers are concerned, for Maruti, it was the A2 (Wagon R, Zen, Swift, Alto) segment again, as sales jumped 42% YoY during the month. Close on its heels was the C segment as volumes witnessed a 41% rise over corresponding previous month. In the case of Tata Motors, while Indica family once again impressed with a 33% jump in sales, it was the 15% decline in Indigo family that restricted growth to single digits. Going forward, the segment is likely to face the heat from Maruti's diesel 'Swift', launched in order to tap the fast growing diesel segment and to replicate the success story of Indica.

    Commercial vehicles: Backed by strong replacement as well as new fleet demand, sales of CVs continued with their dream run and started calendar year 2007 with a bang. The thunder was stolen by Ashok Leyland as volumes growth at an impressive 62% YoY were higher than that of any other player, across all the segments. The company continued to benefit from strong demand for high tonnage vehicles (GVW> 25 tonnes) on account of its better economics. Passenger bus segment, a laggard in recent times also performed impressively as volumes were higher by 29% YoY during the month. Tata Motors, the market leader, witnessed a much lower growth of 36% YoY, which nonetheless is impressive if one considers the absolute performance. This was driven by 31% YoY growth in M&HCVs and 44% YoY growth in LCVs. As mentioned earlier, the industry is in its fifth year of expansion and given the cyclical nature of the industry, we do not anticipate the growth of current magnitude to continue over the medium term and expect sales to cool down a bit FY08 onwards.

    As far as the other segments are concerned, in light of the current credit squeeze, it will be interesting to note the impact on demand for passenger vehicles, especially given the fact that more than 80% of the vehicles in the country are financed. Motorcycles however should continue to grow at double-digit rates, as its sensitivity to change in interest rates is the least.



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