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You are here : IndiaNotes >> Research & Analysis >> Industries >> Auto >> Research

Auto Sector Sales to Remain Muted During Dec on Cash Crunch

Dynamic Equities Pvt Ltd | 01 Jan, 2017  | Follow Author | Add to my Favourites 
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Auto sector will face a fall in December wholesale figure with the rural retail market suffering a double-digit fall against its urban counterpart because of the liquidity crunch post demonetization. The sector had tanked 7.75 per cent in March 2013. The last time the sector registered a decline was December 2015, when volumes slipped by only 0.17 per cent. Data released by the Society of Indian Automobile Manufacturers (Siam) highlights that 1.56 million units of automobiles were sold (in the domestic market) by companies last month which was down 5.48 per cent from 1.65 million units in November 2015. Sales dipped below the 2-million mark after three consecutive months.


Normalized availability of cash may happen by February-March 2017, after which growth is expected to pick up. December wholesales will be affected by a steep decline in retail sales on the back of demonetization.


Rural retails are impacted more (double-digit decline) as compared to the urban segment, due to the liquidity crunch. The outlook for the auto sector, however, looks positive after the normalization of cash crunch. Companies have introduced 100 per cent financing options and are giving discounts to bring buyers back to showrooms.


Segment-wise, the medium and heavy commercial vehicle (MHCV) segment will hopefully be impacted most. Around 30 per cent year-on-year drop in industry volumes can be expected.


On the other hand, the passenger vehicle industry is likely to decline about 11 per cent y-o-y. Annual maintenance shutdown at Maruti Suzuki and a limited wholesale push to clear off older inventory will keep volumes muted. The bookings of vehicles for Maruti tanked by 20 per cent y-o-y in November and it picked up by 7 per cent y-o-y in December.


Meanwhile, Maruti share price rose marginally, settled at Rs. 5319.55.


The two-wheeler industry growth is also likely to decline about 12 per cent. This should be driven largely by Hero Motocorp which will see a sharp decline of around 30 per cent because of poor offtake in rural segment.


This year, Hyundai has manufactured 5 lakh units for the domestic market and though the bookings have come down, Hyundai aim to finish the stock with the existing dealerships by giving higher discounts. Hence, Hyundai like the Maruti is unlikely to push much of its vehicles in the market in December.

To look at the positive aspect of this sector, the most prominent development in the sector was the announcement of new automobile development policy which rolled out after a delay of three years. This policy, though, did not please the existing original equipment manufacturers but it removed uncertainty plaguing the market as the industry was operating without any future vision.




About Dynamic Equities Pvt Ltd

Dynamic Equities Pvt. Ltd. is a a SEBI Registered Investment Advisor and Stock Broker, a leading financial services provider, and one of the major players in the Equity markets in India. With an experience of over 15+ years in Stock Markets and Equity Research, they provide daily updated Support & Resistance of 4200 instruments across 93 exchanges and 56 countries globally. They have an in-house team of over 25 analysts. Under the guidance and mentorship of Mr. Shailesh Saraf, MD of Dynamic Equities Pvt. Ltd., these analysts are dedicately involved in guiding their clients and users of the website www.dynamiclevels.com for trading in the market. Mr. Shailesh Saraf has an experience of over 24 years in the financial market, especially in capital & derivatives market operations, trading, research and management related areas. Dynamic Levels is a website owned by Dynamic Equities Pvt. Ltd. The website can be reached at www.dynamiclevels.com.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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