Consumer sentiment improves for auto industry but urban buyers remain cautious: Motilal Oswal
Mumbai (Maharashtra) [India], Aug 28 (ANI): Wholesale volumes are estimated to grow at 3.6 per cent for two-wheelers and 16 per cent for passenger vehicles in August on account of sustained demand and inventory refilling, according to a report released by Motilal Oswal Financial Services on Friday.
ANI
Aug 28, 2020 15:14 IST
Mumbai (Maharashtra) [India], Aug 28 (ANI): Wholesale volumes are estimated to grow at 3.6 per cent for two-wheelers and 16 per cent for passenger vehicles in August on account of sustained demand and inventory refilling, according to a report released by Motilal Oswal Financial Services on Friday.
However, volumes will decline by 49 per cent year-on-year for commercial vehicles (except Tata) due to low demand. Tractor volumes are expected to grow by 45 per cent on a low base and continued retail momentum.
The report said wholesale volume for August will be a mixed bag, reflecting demand fulfillment for certain models due to supply shortage and inventory refilling for other models.
Although some sporadic lockdowns are still observed, original equipment manufacturers (OEM) 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 increasing preference for personal vehicles and high disposable incomes in the rural markets. For August, most of the OEM plants further improved utilisation on a month-on-month basis.
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 vehicles are seeing demand only from the infrastructure and construction sector which accounts for 30 per cent of total sales.
The overall consumer sentiment has improved but urban customers remain cautious given the uncertain environment.
Tractor demand remains strong with retail growth in most of the markets. However, three-wheeler demand is still very low, further affected by stringent financing norms and a low business environment for the owner or operator.
Demand normalisation is the biggest monitorable with multiple moving parts in the form of normalisation of the supply side, consumer sentiment, availability of finance and impact of BS-VI cost inflation. Valuations reflect a recovery from H2 FY21, leaving a limited margin for safety for any negative surprises.
Hence, companies with, higher visibility in terms of demand recovery, a strong competitive positioning, margin drivers and balance sheet strength are preferred. M&M and Eicher Motors are top large-cap picks while mid-cap picks are Motherson Sumi and Endurance Technologies. (ANI)
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