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Nowadays, skeptics start questioning the durability of the mighty-bull-run whenever markets show some signs of fatigue. And, with every dip getting bought subsequently, optimists keep revising the index targets upwards. We at Ventura Securities believe predicting an index level is a futile exercise. Instead, one should focus on asset allocation and portfolio restructuring at a time when the vaccine-induced-risk-on trade has pushed the markets into unchartered territory.

Referring to auto sales numbers declared by Indian automakers for the month of December, it looks like vehicle demand is still in the slow lane. And, there aren’t enough signals of it coming back strongly any time soon.  

Two-wheeler companies have stuffed 12.5 lakh vehicles with their distributors in December 2020 as compared to 16.11 lakh a month earlier. However, many investors might find the Year-on-Year (Y-o-Y) growth of 19% exciting. The devil lies in the detail though.

As compared to the average inventory of 35-40 days in November 2019, dealers have reported inventory of 45-50 days in November 2020, despite the so-called pent-up demand being strong and the rural economy showing traction.

Tough road ahead for Two-wheeler makers?

(Source: Ventura Research)
Data as on December 31, 2020
Note: Data indicates vehicles sold by manufacturers to dealers

On the other hand, the vehicle registration data suggests that two-wheeler registrations stagnated in December 2020. Against 14.29 lakh vehicles getting registered in November 2020, December registrations stood at 14.17 lakh.

The story of Passenger Vehicles (PVs) is slightly different. PVs seem to be doing better than two-wheelers. And the used-car market is witnessing an impressive growth.

Consolidated December registration data for PVs including that for cars and Utility Vehicles (UVs) wasn’t available at the time of writing this piece. Nonetheless, dealers had 25-30 days of average inventory at the end of November 2020, similar to that in November 2019.

Growth topped in FY19?

(Source: Ventura Research)
Note: Data indicates vehicles sold by manufacturers to dealers

Company specific data reveals that perhaps there’s more pain left for two-wheeler companies. For instance, Bajaj Auto has reported excellent export volumes for December—4.3% Month-on-Month growth and 27% on Y-o-Y. However, it witnessed a sharp fall of 31.6% in domestic motorcycle volumes on an M-o-M basis, which dragged its overall performance. A massive drop in three-wheeler volume also affected its performance adversely.

 Eicher seems to have done better in comparison.

Hits and misses

(Source: Ventura Research)
Data as on December 31, 2020
Note: In case of Eicher Motors only two-wheeler volumes have been considered

A closer inspection of YTD volumes of listed auto companies suggests that matching the FY20 performance could be a herculean task for many of them, let alone surpassing FY19 volumes. 

Interestingly, the PV market has witnessed a peculiar trait of late. For the past few years, UV volumes as a percentage of total PV volumes have gone up considerably—from 28.9% in FY17 to 40.2% in FY20. In this space, unlisted automakers have been giving tough competition to some of the listed players such as Maruti Suzuki India and Mahindra and Mahindra.

The recent rally in metal prices is likely to push costs of automakers upwards.  Given the lacklustre demand scenario, most of them might find it difficult to pass on the cost escalation entirely to their customers. If this turns out to be true, then it could be a double whammy for the sector—weak demand and margin pressures. Will bottom line growth come under threat, going forward?

In the aftermath of the pandemic, some of them are still struggling to get their supply-chains and logistical network well aligned to the changed environment. Those depending on imports of critical components could be vulnerable to a potentially more hawkish regulatory environment for imports, in the wake of Atmanirbhar initiatives.

Besides, the government has been pondering over making it mandatory for PVs to offer airbags to front passenger seats from April 01, 2021.  President of FADA (Federation of Automobile Dealers Associations of India), Mr Vinkesh Gulati opined that this could be “a much-needed safety norm which India should adopt and be at par with global standards.”

Airbags have been made mandatory for the driver seat from July 2019.

The government has been insisting on improving safety measures for the last few years. The implementation of Antilock Braking System (ABS) for two-wheelers was a part of such initiatives. These safety measures are likely to have an inflationary impact on automakers.

The moot question is; isn’t safe-driving the first step towards ensuring the passengers’ safety?

On this backdrop, it seems that the current market rally has made some of the real risks faced by the auto industry appear less potent. On top of this, potential disruptions such as EVs and autonomous driving, amongst others, are likely to make it more difficult for players that can’t keep up with the pace of disruptions.

Connecting the dots…

Optimism is a friend of none and pessimism is a foe of none!

Unilateral rallies mask risks and market meltdowns veil opportunities. Thus, it’s very important to take data-backed decisions while investing. Going by the data, it appears that PV makers are well placed as compared to two-wheeler manufacturers.

Although macro economic factors suggest that the Indian PV market has a long way to go, unfortunately many automakers that are popular amongst Indian consumers aren’t listed on Indian bourses.

That sums up how the Indian automobile market is currently placed!

Please Note (read as a disclaimer): None of the stocks discussed in the article are recommendations to buy, hold or sell. This could just be the starting point for deeper analysis that you might want to carry out on your own. You may also take professional help as you feel appropriate.

If you are investing in any family run company, besides governance, you may also want to take stock of significant developments in the lives of the promoters. Sometimes, their personal life can overshadow market sentiments. Also pay attention to issues such as pledging of shares by the promoter group and the working capital.

You may also like to read: Pharma sector revived in 2020; will it flourish in 2021?Should you say Goodbye 2020 with GoodKnight?



We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.



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