>MOTO GAZE (ICICI DIRECT)

Ahead of festive mania…

Ahead of festive sales, August reported stupendous growth in volume with leaders Maruti Suzuki and Hero Honda registering their highest ever sales in the month. This confirms that the segment in on a high growth trajectory despite poor monsoons. Ashok Leyland was the only company that was unable to catch up in the race and has de-grown by 7.2 YoY while all else registered growth in the range of 10% to 42%. Due to poor monsoons, we were expecting a poor sales performance from Hero Honda, Mahindra and Mahindra (M&M) and Maruti, which garner higher sales from rural markets. However, their sales performance has actually surprised us. Along with new launches, the increase in financial lending and softening of interests led the rally.

For the first five months, the four wheeler major players (Maruti Suzuki, Tata Motors and M&M) reported 16.6% sales growth while exports were robust growing at 58.7%. The growth was mainly led by Maruti Suzuki. The two and three wheelers segment reported 12.7% growth while exports were down 23.5%.

We expect the automobile segment to grow at 16%. The two-wheeler segment would grow at ~17% while the passenger vehicles segment is likely to register 10-12% growth. We were expecting the commercial vehicle segment to remain subdued with 4-5% volume fall. However, 10% YoY growth and 4.9% MoM growth reported by CV leader Tata Motors is likely to reverse the trend for the segment and report flat to 2%-3% growth.

Two–three wheeler industry
With reviving volume sales, Bajaj Auto finally joined the race with 6% volume growth while Hero Honda continued riding high and registered 35.9% growth in total sales for August 2009. TVS Motors also ended with double digit 11% growth. Yamaha Motor’s sales jumped 63% to 19,508 bikes in August 2009 from 11,974 bikes in August last year while the other Japanese two-wheeler maker Suzuki Motorcycle India’s sales increased 18% to 13,030 units in August.

We expect the two-wheeler segment to grow at 17% in FY10. Hero Honda Motors, which is expected to grow at 24% per annum, was the major contributor to segment growth. We expect 7-8% growth from three-wheeler sales for the year.

To see full report: MOTO GAZE