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  • MARCH 27, 2003

Auto: 4QFY03 in review

The performance of auto stocks on the bourses over the last three months has been lacklustre. The key cause of concern is weakening volumes in light of poor agricultural and industrial sector. We take a look at the recent performance of the various segments in the auto sector and expectations for the forthcoming quarter.

CV led growth...
(% YoY change) Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03
Passenger car 9.2% 15.4% -0.3% -3.3% 2.2% -24.7%
UVs 14.1% 14.9% 0.6% 9.0% 32.1% 27.3%
LCV 15.5% 23.1% -3.4% 8.8% 13.8% 10.4%
Buses & trucks 13.5% 23.8% 12.5% 41.6% 20.2% 53.5%
Total 10.7% 16.8% 0.9% 4.4% 8.6% -8.2%

As evident from the table above that reflects the year-on-year growth in monthly volumes for each of the category, commercial vehicle sales continue to remain robust. The sector saw a reversal in demand in September 2001 and from then on, it has been an northbound demand trend. The growth, as we mentioned in our previous articles, is largely led by higher growth in industrial sector and continuation in demand for higher tonnage vehicles (as against 42% of total HCV sales in FY02, we expect contribution from CVs greater than 16 tonnes at around 56% in FY03). For the first eleven months of the current fiscal year, buses & trucks unit sales have increased by 20% to 90,669 units. Since passenger bus demand has been lacklustre in FY03 due to the dismal state of state transport undertakings, growth was largely led by the H/MCVs.

There has been a sharp rise in utility vehicle (UV) sales in January and February 2003, which is on account of higher volume sales of 'Scorpio' and the new 'Qualis'. Just to put things in perspective, M&M and Toyota have posted a 26% and 92% YoY growth in UV sales in February 2003 (37% and 133% in January 2003). With Maruti posting a 27% decline in passenger car sales in February 2003, the sector numbers were also skewed, which is reflected in the table above (55% market share). The performance of the tractor and two-wheeler segments also is nothing to write home about.

Given this backdrop, the fourth quarter performance of auto majors like Punjab Tractors, M&M and Hero Honda is likely to remain subdued on the back of weaker revenue growth. Telco is expected to post a sharp rise in both sales and profits in the fourth quarter riding on the back of impressive CV volume growth (has ranged around 25% in the last two quarters).

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