Automobiles Sector Check - Steady YoY Growth Continues: Reliance Securities

Reliance Securities Report

As per the Society of Indian Automobile Manufacturers, domestic auto sales volume (excluding commercial vehicles) grew ~10% YoY (down 4% month-on-month) to 14,72,078 units in February 2023.

Notably, all segments of the automobile industry witnessed a decent performance in domestic market, supported by healthy urban sales.

However, exports continue to remain laggards. Traditionally industry witnesses month-on-month decline due to lower number of days, however industry witnessed month-on-month growth this time in few segments like three-wheelers, cars and scooters.

In passenger vehicle segment semiconductor supply impacted production to some extent. On the other hand, three-wheeler segments recorded healthy double-digit growth of more than 80% YoY. Despite improvement, overall demand level remained below pre Covid level for two-wheelers.

The wholesale volume was broadly in line with the retail. We expect volume improvement to continue gradually as nearly normal monsoon and higher water reservoir would support Rabi cropping and rural recovery in coming months.

Industry would witness healthy pick up in H1 FY24 with likely healthy agri output and cool off in inflation, turning customer sentiment positive. Electric vehicle penetration should improve further in 2023.

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