Jun 7, 2007|
Autos: The month that was...
May auto sales numbers have been announced and two wheeler sales have once again come on the wrong side of the growth chart. Infact, barring a company or two, it has not been a particularly good month across most of the segments. Let us have a look at the performance of leading companies across three key segments of two-wheelers, passenger vehicles and commercial vehicles.
|Passenger vehicles (cars + UVs)
|* includes exports
Two-wheelers: Owing to a huge 22% fall in sales of low end motorcycles (100 cc), the industry has witnessed a fall of 13% YoY over May 2006. The worst hit has been Bajaj Auto, the number two player, where volumes have fallen by 15% YoY. Not far behind is TVS Motor, the third largest player, as it has experienced a drop of 13% YoY in total two-wheeler sales. Aided by new launches, Hero Honda, India's largest two-wheeler manufacturer has however been able to save some face as volumes fall at 6% YoY has been the lowest here. The sector has been hit hard by some strict stance being taken by institutions towards financing two-wheelers. With pressure on margins too showing no signs of abating, there seems to be no respite in sight for the two wheeler companies.
Passenger vehicles: Relative to their two-wheeler counterparts, May has been another good month for the passenger vehicle industry. Led by an impressive 104% growth in the A3 segment, courtesy its latest launch SX4, market leader Maruti sold 10% more vehicles in May than it managed same period last year. While Maruti's performance was impressive, the show stealer for the month however was M&M, the UV major, where volumes spurted 54% YoY. Here too, new launches like the 'Logan' and a new look 'Scorpio' helped lend increased traction to volumes . On the other hand, lack of a new launch in its portfolio seemed to have hurt Tata Motors, the home grown auto major, as a 7% volume decline in cars led to the overall segment sales falling by 3%. The company's UV sales however improved 17% YoY.
Commercial Vehicles: Although M&M once again tops the list here, due to its insignificant numbers as compared to the big two, Tata Motors and Ashok Leyland, let us keep it out of the discussion for the time being. After recording growth for five straight years, one of its best streaks ever, it looks like CV sales are finally running out of steam. This is manifested by the negative growth in volumes recorded by Tata Motors, a fall of 6% as compared to May last year. Ashok Leyland however, has been able to show a modest growth of 2%, thanks mainly to more than two-fold growth in its passenger buses.
As mentioned in previous write-ups, in these trying conditions, the company (be it in the two-wheeler or four-wheeler segment), which is able to sweat its assets more and hence generate more cash from operations, will be able to weather the storm better. Higher amount of cash will ensure that the company's balance sheet is strong enough to fund new models, a key to survival in a competitive environment. Therefore keep an eye on the cash that the company generates internally and base your investment decisions accordingly.
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