Motilal Oswal: Automobiles Sector - Inventory Refilling In Seasonally Weak Month As Supply-Side Constraints Ease
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Motilal Oswal Report
Positive momentum was seen in demand during August 2020, and original equipment manufacturers (OEMs) saw production normalizing with continuous improvement in the supply chain.
Although some sporadic lockdowns are still observed, OEMs have largely adjusted to the new normal, and are matching supply with demand and slowly moving to inventory refilling.
Demand recovery has sustained on account of an increasing preference for personal vehicles and high disposable incomes in the rural markets.
For August 2020, most of the OEM plants further improved utilization on a month on month basis.
Our interactions with leading industry channel partners indicate Two-Wheeler and passenger vehicle are seeing a demand shift from aspirational to need-based demand.
The majority of entry-level passenger vehicle customers and urban Two-Wheeler customers are purchasing vehicles for safety purposes, who otherwise may have avoided the purchase.
Commercial Vehicle is seeing demand only from the Infrastructure/ Construction sector, which accounts for approximately 30% of total sales.
Overall consumer sentiment has improved, but urban customers remain cautious given the uncertain environment
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