May 23, 2001|
Auto sector: FY01 roundup
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
* figures are for April-February 2001
|M & HCVs
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
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