>Automobile Sector (RELIANCE MONEY)

Two Wheeler Sales Volume Update - March 2009

FY09 ends with hope of improvement….

FY09 ended on a positive note for two wheeler companies as sales volumes of companies showed improved performance in the last few months as compared to earlier period of the year. HH & TVS have reported a jump in volumes to the extent of 10% and 4% respectively. While, BAL has restricted fall to 13% due to strong volumes generated by the recently launched XCD. It is noteworthy that despite the fall in volumes on a yearly basis, BAL has reported flattish growth on m-o-m basis during the month ofMarch 2009 and is improving sales every month, though not on y-o-y basis. The benefit of excise duty cut along with new launches in the form of variants has led the growth for companies in the two wheeler space

The excise duty cut benefit extended beyond 31st March 2009 is also a positive indication for the two wheeler industry and we believe that it will help the companies in reporting good volumes along with attractive new launches, Which without any doubt have been the key for the volumes growth for the companies during FY09. In the near future we expect the volumes of companies to improve on the back of 1) softening interest rates and 2) Improvement in exports (post H1FY10). However, we remain hopeful that volumes will continue to pick up as the companies have planned new launches strategically which is likely to continue the existing growth of companies in future.

Exports which account for a sizeable portion of the volumes for TVS and BAL have been declining on a monthly basis which is due to the increasing competition in the global arena and also due to the slowdown in global economy. Exports of BAL fell by 8.2% y-o-y while TVS grew robustly by 25% on a y-o-y basis, but its volumes on m-om basis reported a fall of 1.5%. It is interesting to note that on a y-o-y basis the two wheeler industry has reported growth of 2.5%. We upgrade our outlook on the sector to Neutral from negative on the back of improvement in overall scenario.

Industry Highlights
* Honda will exit the geared scooter market in India and phase out its 150 ccmodel Eterno as the company plans to focus on the gearless segment.
* TVS Motors will launch a unisex scooter model in the current financial year , inpace with the popularity of the segment in the present urban and semi-urban twowheeler markets.
* Yamaha Motor has launched its new bike 'FZ-S' priced at Rs 67,000 (ex-showroomDelhi).
* Honda Motorcycle & Scooter India (HMSI) has decided to launch a 100ccmotorcycle in the next fiscal.

To see full report: AUTOMOBILE SECTOR