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This article is more than 2 year old.

Automobile sector remained subdued due to high inventory, rising cost pressures, say analysts

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February vehicle sales remained subdued across all segments amid a high amount of unsold stock and tepid buying sentiments

Automobile sector remained subdued due to high inventory, rising cost pressures, say analysts
Auto sales for the month of February remained subdued across all segments, with data showing that the retail sales were disappointing in February amid a high amount of unsold stock and tepid buying sentiments.
Nomura said that the downside risk continues for most auto companies except Bajaj Auto. It expects the industry performance to remain weak in the near-term on high inventory and rising cost pressure. Hence, wholesales are likely to remain subdued despite some improvement in retails in March due to marriage season. The brokerage maintains a 9 percent YoY industry growth estimate for FY20F.  Top pick for Nomura from auto sector is Maruti Suzuki.
Meanwhile, Deutsche Bank believes that the two-wheeler segment (2W) witnessed a third consecutive month of decline in February 2019, on the back of strong February 18 base of +24% YoY. Among the mass-market players, Bajaj Auto (6 percent YoY), TVS Motor (0.5 percent YoY) outperformed the market while Hero MotoCorp was broadly in-line.
Motilal Oswal said that the passenger vehicle (PV) volumes remained poor but appear to be recovering due to new product launches and low channel inventory. Speaking about tractors' volume growth, it slowed down owing to a high base and muted farm sentiment in key markets. The brokerage prefers PVs over CVs/2Ws due to their stronger volume growth and a stable competitive environment. The top picks from large caps are Maruti Suzuki and Motherson Sumi Systems, and Endurance Techologies and Exide Industries from mid caps.
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