Auto, Auto Ancillaries Preview - Rising Input Costs, Negative Operating Leverage Hit Margins: ICICI Securities

Steel gearwheels sit on a gearbox and axle assembly line inside a machinery factory in Germany. (Photographer: Krisztian Bocsi/Bloomberg).

Auto, Auto Ancillaries Preview - Rising Input Costs, Negative Operating Leverage Hit Margins: ICICI Securities

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ICICI Securities Report

The auto industry witnessed drop in wholesale despatches in Q1 (~31% QoQ) as original equipment manufacturers declared production shutdowns ranging one to three weeks as Covid-19 second wave struck.

As an increasing number of states began to witness lockdowns, with public transport curtailed and component shortages (e.g. semiconductors), OEMs focused on completing plant maintenance to manage potential production issues.

On the consumer side, two-wheeler wholesales fared marginally worse (30% decline QoQ) than passenger vehicles (28% down QoQ) due to delay in wedding season (relevant for North India).

Tractor wholesales only moderately (~1% QoQ) due to seasonality. On the commercial side, commercial vehicle wholesales fell ~50% QoQ.

Click on the attachment to read the full report:

ICICI Securities Q1FY22 Auto Preview.pdf

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