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ICICI Securities Report
August 2020 dispatches are a sign of early festive kick-off (Onam, Ganesh Chaturthi) and original equipment manufacturer expectations of strong festive demand.
However, channel inventory is likely to rise to near normal levels in September 2020 prior to second phase festive season in October 2020.
Thus, we expect wholesales to start tracking retail trends post October 2020, sustained production growth would remain contingent on retail off-take.
Another key monitorable would be the evolution of retail/channel financing post the lifting of moratorium.
Two-Wheeler festive kick starts across few regions-
Hero MotoCorp Ltd. reported sales of approximately 584k units, up 8% YoY. Domestic motorcycles outperformed scooter as it grew approximately 9% vis-a-vis 11% decline for the latter.
The company is operating at approximately 100% production capacity with almost all its customer touch points operational.
The recent launch of Hero Xtreme 160R has been well received and led to an increase in market share in the premium segment.
Passenger vehicles (PVs): Demand growth optically better due to low base effect-
Maruti Suzuki India Ltd.’s demand revived at 17% growth YoY to approximately 124k units with mini-vehicle segment posting strong growth of 95% YoY to approximately 19.7k units (aided by low base effect), while compact segment grew 14% YoY to approximately 62k units.
Ciaz volumes slumped 23% to 1,223 units. Utility vehicles (UV) segment volumes grew 13% YoY at approximately 210k units (no clear sign of downtrading yet as UV growth continues to remain strong).
Despatches to Toyota fell 41% to 1,379 units. Exports, too, dropped 15% to approximately 8000 units.
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