Automobiles Channel Checks - Demand, Profitability Pressure Persists: Nirmal Bang
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Nirmal Bang Report
Based on our channel checks, we note that demand revival has been relatively tepid across most segments. Two-wheeler dealers indicated slower-than-expected start to the marriage season, with footfalls and sales down 8-10% YoY and 12-14% month-on-month in December 2021 year-to-date.
In the near term, the dealers see limited visibility on demand revival prospects given the steep cost inflation and subdued sentiments. We note that given the high inventory levels (40 plus days) and weak demand, inventory rationalisation may result in weak wholesales in the coming months.
In passenger vehicles, the dealers alluded to a gradual month-on-month recovery (2-4% plus in Dec-21-year-to-date), but on YoY basis, sales are down ~8-10%, due to low inventory (15-20 days) and supply chain constraints.
The dealers are cautiously optimistic about improving sales amid a sustained demand momentum.
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