Auto sector: FY01 roundup - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Auto sector: FY01 roundup

May 23, 2001

FY01, was a tough year for the automobile sector as demand in almost all segments has reported a decline. On the costs side too the sector faced rough weather as competition has gone up in the industry coupled with higher emission expenses as well as rising marketing costs. This culminated in falling margins for the industry. This dismal performance has been discounted by the stock markets as all the auto bigwigs have seen a significant decline in their valuations. On the brighter side, the auto sector has attracted buying interest recently, even though volumes have yet to show signs of any improvement. The reason being brighter prospects for agriculture growth.

In the two wheeler segment even though motorcycles grew by a robust 20% in FY01, scooters reported a decline of 28% YoY and mopeds a fall of 5.3% YoY. The market share of motorcycles went up to 58% during the year, while that of scooters fell to 24% and mopeds to 18%. The two wheeler industry is showing signs of slowdown in the rural markets since the past few months as motorcycle segment growth was lower in 4QFY01.

The passenger car segment reported an overall decline of 7.5% YoY. The small car players faced higher competition during the year. Maruti and Telco reported a drop in volumes, while Hyundai and Daewoo reported some growth in volumes in the small car segment. Maruti Udyog's market share fell from 63% in FY00 to 58% in FY01. The medium sized car segment did well in FY01 although on a smaller base, as new variety of models were introduced during the year.

The commercial vehicles (CVs) segment reported a decline of 12.3% YoY in volume due to lower industrial and agricultural sector growth, which was further aggravated by rising fuel costs and sales tax rationalisation. In the M & HCVs segment the decline was steeper at 21.3% in FY01 after a robust growth of 33% in FY00. In this, the truck segment suffered more, while the bus segment got some relief due to stricter pollution norms. In Delhi, the Supreme Court has ordered that all buses plying should be run on CNG latest by September 2001. As a result the demand for CNG buses has recently gone up.

The LCV segment grew by 4.5% YoY in FY01. Though this was lower than previous year's growth at 6.9%, atleast this sector reported positive growth. The companies that did well in this segment are Eicher Motors and Swaraj Mazda.

The decline in agricultural production in FY01 coupled with rising inventory levels in the industry lead to a 9.3% YoY (April-February 2001) fall in volumes for the tractor industry. In this segment, Mahindra & Mahindra (M & M) made major gains in market share due its aggressive marketing stance. The prospects for this sector are expected to pick up towards the latter half of FY02. The reason being expectations of a good monsoon which may result in higher demand from the agriculture sector.

Auto volumes hit a spead breaker
  FY00 FY01 % change
M & HCVs 111,350 87,588 -21.3%
LCVs 60,173 62,864 4.5%
Utility Vehicles 123,471 126,953 2.8%
Cars 638,792 590,647 -7.5%
Scooters 1,253,969 901,877 -28.1%
Motorcycles 1,796,734 2,156,032 20.0%
Mopeds 726,075 687,635 -5.3%
Three wheelers 202,255 207,118 2.4%
Tractors* 232,524 210,841 -9.3%
* figures are for April-February 2001

In the utility vehicles segment, the entry of Toyota Qualis provided some relief to urban utility vehicle volumes. Toyota Qualis sold 25,375 vehicles during FY01 as compared to 3,519 vehicles in FY00 and was the only company in this sector to witness a positive growth. Though Telco's total volumes in this segment declined by 3.3% in FY01, its domestic volumes reported marginal improvement.

Though all these figures seem disheartening for shareholders of automobile stocks, it is important to see how the future prospects are expected to be. The reduction in excise duty for some segments, coupled with higher import duty on second hand cars and higher import duty on new CBUs in the car and two wheeler segment are likely to help demand prospects of the domestic industry.

However it all depends on economic growth during the year, and all eyes are set on the forthcoming monsoons. In the likelihood of a normal monsoon one can expect the latter half of FY02, to see some improvement in demand for the auto sector. Also the government's efforts towards improving infrastructure will help the sector. Auto sector report FY01


Equitymaster requests your view! Post a comment on "Auto sector: FY01 roundup". Click here!

  

More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

I Believe These Stocks Will Deliver the Most Outsized Returns in 2021 and Beyond (Profit Hunter)

Sep 23, 2020

Rules of the racetrack can help you bag the biggest gainers of the coming decade.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE AUTO


Oct 1, 2020 09:33 AM

COMPARE COMPANY

MARKET STATS