Dolat Capital: Auto Original Equipment Manufactures Monthly Preview
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Dolat Capital Report
Our channel checks indicate two-wheelers and personal vehicles are seeing gradual improvement in enquiries to pre-Covid-19 levels by July end, however supply continues to be a laggard.
Two-wheeler, four-Wheeler, commercial vehicle dispatches are likely to fall by 14%, 25% and 73% YoY while tractor sales to grow by 23% for the month of July 20.
Two-wheeler retail sales are comparatively better led by pent up demand and preference for personal vehicles. Rural demand is sustaining well, a trend which is unlikely to change materially.
Tractor demand continues to hold up led by strong Rabi output and good monsoon. In personal vehicle segment, recovery is being driven by necessity-based demand, with the major portion of sales coming from first-time buyers.
However, the spread of Covid-19 in rural and semi urban regions and reimposition of lockdowns are posing a risk for production and supply chain.
Banks and financial institutions are very cautious and loan rejection rate is high (in case of personal vehicle). They are more focused on two-wheelers (low ticket item and high margin business) and tractor financing (comes under priority sector lending).
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