>Auto Sector 4 wheeler (RELIANCE MONEY)

Surprise spike in sales volume

Passenger vehicle sales numbers for the month of February 2009 came out to be better than expectations. Sales of companies have shown impressive growth during the month of February 2009 as the excise benefit along with improvement in financing situation by PSU banks have led to improvement in volumes. The CV segment continues to face weak demand but has been reporting sequential growth from the last two months on the back of accelerated depreciation policy and excise cut announced.

We believe that the LCV segment which has recently been offered the excise cut will benefit the most and is likely to show some improvement in volumes on the back of excise benefit. The M&HCV segment is also under the excise bracket but we don’t expect that this segment witness improvement in volumes mainly due to slowdown in the overall economy. It is noteworthy that despite the price hike taken by few players in the last two weeks of February the sales volumes have increased which is a positive signal and we believe this is largely due to the improvement in financing situation. Interest rates are likely to fall down further as RBI has cut repo and reverse repo rates by 50 bps. We expect passenger car industry would continue to report improvement on m-o-m basis due to excise duty benefit and rural market demands, but CV demand is likely to witness pressures as overall economy is still showing weakness.

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