Sentiments in the rural market improved with rising exports of wheat amid geopolitical tensions. Also, there was good progress in rabi harvesting. This boded well for the tractor segment which surpassed expectations. Mahindra & Mahindra Ltd (M&M) and Escorts Ltd clocked 49% and 19% y-o-y growth in tractor volumes respectively. Outlook seems firm with better crop realization and expectations of normal monsoon which augurs well for the upcoming kharif season.
In the passenger vehicle (PV) segment, semiconductor shortage impacted performance to a certain extent. Maruti Suzuki India Ltd registered 5.7% y-o-y and 11.6% sequential decline in April volumes. The management expects semiconductor shortage to have a slight impact on FY23 production. Tata Motors Ltd reported 65% y-o-y growth in its PV business. However, on a sequential basis, volumes declined by 2%.
“PV demand remains skewed towards new launches /electric vehicles /compressed natural gas vehicles /sports utility vehicles, while entry-segment cars remain weak. Further increase in inflation and oil prices remain headwinds for FY23," said analysts at Nomura Financial Advisory and Securities (India) in a report on 3 May.
The commercial vehicle (CV) segment, which is seeing a strong cyclical upturn, also saw y-o-y increase in volumes. Tata Motors CV business and Ashok Leyland Ltd registered 87% and 42% y-o-y increase in volumes respectively. But sequentially volumes declined by 34.5% and 41% respectively. Analysts at Reliance Securities note that, traditionally, CVs decline sequentially in April.
Among two-wheelers (2W), Hero MotoCorp Ltd, TVS Motor Co. Ltd and Eicher Motors Ltd (Royal Enfield) reported 12%, 24% and 17% y-o-y growth in volumes respectively while Bajaj Auto Ltd’s 2W volumes in April declined by 19% y-o-y as it continues to face chip shortage.
However, on a sequential basis, Hero, TVS and Royal Enfield’s volumes fell by 7%, 4% and 8% respectively. But Bajaj Auto’s volumes increased by 10% indicating an easing chip shortage situation. Further, demand is expected to improve given the ongoing marriage season, improving rural demand and reopening of schools, colleges and offices.
Meanwhile, electric 2W penetration dropped to 3.8% in April from 4.3% in March as automakers faced a supply crunch, note analysts at Nomura. Also, recent instances of EVs catching fire have weighed on demand.
“Channel check suggests that overall sales performance started improving in Apr’22, backed by positivity during festival. We expect volume pressure to continue over the next 1-2 months, while it would pick up in Q2FY23 with beginning of festivals and likely healthy agricultural output at better pricing (crop prices moved 10-20% higher than minimum support prices due to rising exports demand recently)," said analysts at Reliance Securities in a report on 2 May.
