>AUTO SALES UPDATE – JANUARY 2010 (EDELWEISS)

■ Hero Honda: Strong performance continues
Hero Honda (HH) continued its robust performance with sales of 0.39 mn units, implying growth of 24% Y-o-Y and 4% M-o-M. This growth, in spite of strong competition (particularly from Bajaj Auto’s Discover), underlies the strength of the company’s brand and rural reach. HH plans to launch three new products/variants in the next two months to counter the highly anticipated Honda’s CB Twister.

Year begins on a strong note

■ Maruti Suzuki: Domestic segment drives growth
Maruti Suzuki (MSIL) reported robust volumes of ~96,000 units (up 33% Y-o-Y; 13% M-o-M). Domestic volumes were up 21% Y-o-Y and 14% M-o-M. These strong numbers reflect a certain degree of restocking with dealers after the company registered over 100,000 retail volumes in December, partially on account of higher discounts and purchase preponement (as vehicle prices were expected to rise in January). While we expected the domestic volumes to remain strong, the continued uptick in exports (despite withdrawal of scrappage incentives) surprised positively.

■ Tata Motors: Cars provide the boost
While Tata Motors’ (TTMT) M&HCV segment continued a strong run (up 170% Y-o- Y; 2.6% M-o-M), boost to volumes came from the passenger vehicle segment (up 21% Y-o-Y; 52% M-o-M) due to new product launches (Manza) and inventory restocking. The LCV space continued robust performance (42.5% plus Y-o-Y), driven by Ace and Magic. Magic is receiving tremendous response as a suburban/rural mass transport vehicle. Nano continued its run-rate of ~4,000 units.

■ Mahindra & Mahindra: Robust numbers
Mahindra & Mahindra (M&M) continued to grow in the tractors (up 69% Y-o-Y; 38% M-o-M) and UV space (up 52% Y-o-Y; 20% M-o-M), with overall volumes being the highest ever. While the underlying robust trend is unmistakable, the monthly volumes also reflected seasonal trends (January tractor volumes tend to be higher than those of December). The sub–tonne, Gio, seems to be garnering reasonable volumes, as reflected in the 159% growth in the goods carrier segment.

■ Outlook: Strong start to the new year
Aided by buoyant economic growth, automobile volumes across segments continue to be extremely robust. In addition, there is possibility of preponement of demand in February on account of an anticipated increase in excise duties. Despite possible hiccups in the form of higher interest rates/excise duties, we expect demand to remain strong in FY11. The Y-o-Y growth may, however, temper on account of a higher base.

To read the full report: AUTO SALES UPDATE