After seeing healthy demand during the first quarter of fiscal 2022, the auto industry suffered a slump as authorities clamped local lockdowns to tackle the deadly second wave of coronavirus cases in May.
Given the April-June quarter of 2020 was severely impacted by the COVID-19 pandemic and the nationwide lockdown, the volume trends are to be examined on a sequential basis.
The Nifty Auto index has performed in line with the broader market during the April-June 2021 quarter, up 7 percent QoQ, due to commodity cost inflation and moderating growth trends across two-wheelers.
The sector returns have been normalising over the past six months due to inflationary cost pressures and elevated valuations.
While the total industry sales volumes have declined around 33 percent in Q1FY22 as compared to the previous quarter, the topline performance is expected to be slightly better on the back of broad-based price hikes. However, industry margins are seen impacting due to sustained rise in commodity cost inflation.
According to ICICI Direct among two-wheelers, Bajaj Auto performed the best, with volume decline limited to 14.2 percent (8.99 lakh units) courtesy solid exports delivery. Hero MotoCorp reported a 34.7 percent decline to 10.24 lakh units while Royal Enfield volumes at Eicher Motors fell 39.6 percent to 1.24 lakh units.
Passenger vehicle (PV) market leader Maruti Suzuki recorded 28 percent degrowth to 3.5 lakh units while Tata Motors’ standalone volumes fell 40.1 percent to 1.14 lakh units (JLR volumes expected at 88,324 units, down 35.3 percent).
M&M’s total volumes (automotive, tractors) were down 7.6 percent to 1.87 lakh units while pure play CV maker Ashok Leyland posted 59.2 percent de-growth to 17,987 units. Escorts’ tractor sales de-grew 20.4% to 25,935 units.
Ex-Tata Motors, OEM coverage universe is seen posting a 25.8 percent QoQ decline in net sales accompanied by around 250 bps sequential drop in margins to 9.5 percent, as per the brokerage.
Meanwhile, the commodity prices have remained firm, with OEMs raising prices to partially offset the above. Further, the sudden outburst of the COVID wave in Apr-May 2021 had resulted in temporary production shutdowns, which will impact profitability this quarter.
(Edited by : Ajay Vaishnav)