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Special Report August Automobile Review: Underlying trend remains robust

We remain Cautiously Positive on Sector

1 s t September 2010 Sr Analyst : Sejal Jhunjhunwala


Email: sejal@way2wealth.com
Contact: 022 – 40192918
All set to touch new highs…
We are heading towards a new peak for Automobile sales as we proceed in FY11. Though the underlying trend
remains healthy signaling uninterrupted demand, H2FY11 would be closely watched, especially from Nov 10 –
Feb 11. The months post the festival season would be keenly watched. We have excluded the month of March, as
, as per industry procedure this month sees higher numbers on account of stock clearance by the OEM’s. We
expect the growth rate to moderate as we enter H2FY11, on account of the high base effect and probable hike in
ownership costs as we have seen the base rate for auto loans being increased by the private bankers. As of now
this doesn’t pose as a threat , but if we see a sustained increase , at the next meet which is to take place mid of
September , we may be compelled to revise our growth estimates for the industry.

But to get an idea as to where we are heading in comparison to the earlier peak cycle for the industry we have
studied the industry volumes (segment specific) over a period of 7 years.

Industry Sales Trend…


The highlighted block indicates the industry’s peak sale volumes.

5yr
Domestic CAGR
Sales Trend FY04 FY05 FY06 FY07 FY08 FY09 FY10 (%)
PV 9,02,096 1,061,572 1,143,076 1,379,979 15,49,882 1,55,2703 1,949,776 11
CV 2,60,114 3,18,430 3,51,041 4,67,765 4,90,494 3,84,194 5,31,395 9
3-Wheeler 2,84,078 3,07,862 3,59,920 4,03,910 3,64,781 3,49,727 4,40,368 4
2-Wheeler 5,364,249 6,209,765 7,052,391 7,872,334 7,249,278 7,437,619 9,371,231 6
TOTAL 6,810,537 7,897,629 8,906,428 10,123,988 9,654,435 9,724,243 12,292,770 7

As can be seen from above we are at the peak right now across all the segments pertaining to the domestic
market.

5yr
Exports CAGR
Sales Trend FY04 FY05 FY06 FY07 FY08 FY09 FY10 (%)
PV 129291 166402 175572 198452 218401 335729 446146 21
CV 17432 29940 40600 49537 58994 42625 45007 2
3-Wheeler 68144 66795 76881 143896 141225 148066 173282 18
2-Wheeler 265052 366407 513169 619644 819713 1004174 1140184 17
TOTAL 479919 629544 806222 1011529 1238333 1530594 1804619 17

As can be seen from above, with the exception of CV’s we are at the peak levels for all the segments pertaining to
the export markets. CV exports had made a peak in 2008 with 58994 units, which is yet to be achieved.

We expect the PV, CV, 2&3Wheelers Industry to see a growth of 20%, 25% & 18% over FY10, touching new
highs, post which we would see moderation in the same.

PV- Passenger Vehicles


CV- Commercial Vehicles

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August Sales - Underlying trend remains Healthy, H2FY11 to see interrupted
demand

Industry Market Share FY10


15.9%

2.0%
2.3%
3.6%

76.2%

PV M&H C V LC V 3‐W heelers 2‐W heelers

Key remarks (company-wise) given below. The row highlighted in Light blue indicates the outperforming segment
for the month.

% Chg % Chg April10- April09- %Chg


Hero Honda Aug-10 Aug-09 Y-o-Y July-10 M-o-M Aug10 Aug09 Y-o-Y
Total 424617 415137 2.3 427686 -0.7 2086342 1900932 9.8

™ Hero Honda volumes are in line with our expectations of showing flat growth. It is the 4th consecutive month the
company has crossed sales of 4lac units.
™ We expect it to show a volume growth of 15% YoY in FY11

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% Chg % Chg April10- April09- %Chg


TVS Motors Aug-10 Aug-09 Y-o-Y July-10 M-o-M Aug10 Aug09 Y-o-Y
Motorcycles 66,574 51,127 30.2 61,051 9.0 3,27,983 2,46,903 32.8
Scooters 40,913 28,582 43.1 40,357 1.4 1,76,756 1,23,505 43.1
Mopeds 59,622 47,133 26.5 61,698 -3.4 2,81,517 2,24,519 25.4
Total 1,67,109 1,26,842 31.7 1,63,106 2.5 7,86,256 5,94,927 32.2
Exports(inc in above) 19,028 11,747 62.0 20,061 -5.1 93,223 56,164 66.0
THREE WHEELERS 3,626 1,033 251.0 3,108 16.7 14,533 4,282 239.4
TOTAL SALES 1,70,735 1,27,875 33.5 166,214 2.7 8,00,789 5,99,209 33.6

™ TVS Motors numbers are very good signalling the trend to be healthy.
™ The Motorcycle segment has shown a pick up in August. The numbers are above its runrates clocked in April
2010 & June 2010, but still below its peak seen in May 2010.
™ Strong demand traction continues in the scooter segment, with its MoM sales on an uptrend.
™ The mopeds segment sees a slight contraction in August after 4 months of rising sales.

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™ Exports also see a slight contraction, but the trend remains healthy.
™ Highest ever sales are seen among its Three wheelers & domestic sales taking its Total sales at a new peak.
Three Wheeler segment continues to show rapid growth, getting closer to M&M.
™ The company is on track to meet our FY11 volume target of 1.84mn units, implying a growth of 20% YoY.

bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb
% Chg % Chg April10- April09- %Chg
Maruti Suzuki India Aug-10 Aug-09 Y-o-Y July-10 M-o-M Aug10 Aug09 Y-o-Y
Maruti 800 (A1) 1,919 2,734 -29.8 1,680 14.2 10,505 12,649 -16.9
Alto,Zen,WagonR,
Swift, Astar,Ritz(A2) 65,953 52,473 25.7 64,079 2.9 3,00,545 2,47,321 21.5
SX4,Dzire (A3) 10,479 7,821 34.0 10,352 1.2 49,789 36,869 35.0
Omni & Versa & Eeco
(C) 14,157 6,601 114.5 13,617 4.0 61,295 36,136 69.6
Total Passenger Cars 92,508 69,629 32.9 89,728 3.1 4,22,134 3,32,975 26.8
UV (Gypsy & Grand
Vitara) 166 332 -50.0 386 -57.0 3,541 1,929 83.6
Total Domestic 92,674 69,961 32.5 90,114 2.8 4,25,675 3,34,904 27.1
Exports 12,117 14,847 -18.4 10,743 12.8 63,297 54,707 15.7
Total Sales 1,04,791 84,808 23.6 1,00,857 3.9 4,88,972 3,89,611 25.5

™ MSIL’s numbers have been ahead of our expectations, yet again.


™ After May 2010, this is the third month where the company’s sales have crossed the 1lac mark
™ All 3 segments , A2, A3 & C segments have shown a very good performance with C segment seeing its highest
ever monthly runrate.
™ C segment sales continue to be driven by the well received Eeco model, which sold a little over 33k units since
its launch in Jan 2010.
™ A2 segment sees a healthy growth as all the models are doing well. Ritz has done over 89k units til date, New
WagonR has done 58k-59k units til date and A-star has done 68k units. But it continues to face competition from
Fiat India, Ford India (Figo) & Hyundai Motor India (Santro, i10, i20).
™ It enjoys the highest market share among the A3 segment which continues to show a healthy runrate.
™ PV sales infact register a higher monthly runrate than its previous best month of May 2010
™ UV sales continues its decline into the month of August, but this segment is highly variable as it depends upon
orders from the army and its execution.
™ Exports show a pick up on a MoM basis after the contraction witnessed in the previous month. The numbers are
close to the levels of May 2010. Out of the export portfolio, Europe accounts for 65% as against the earlier 80%,
easing concerns on export realisations.
™ The avg runrate for exports remains at 12k units with 82%-85% coming from A-star.
™ The company unveiled its CNG models during the month at Delhi NCR, Gujarat & Mumbai, which, includes Alto,
Zen Estilo, WagonR,SX4 and EECO. It also launched its new K series model Alto K10.
™ The company’s continuous exercise of debottlenecking at its plants has enabled it to stretch its capacity levels. It
is in a position to touch 1.3lac units at the current levels.
™ We estimate its FY11 unit sales to be at 1.2mn units which is a growth of 17.8% over FY10. In order to meet the
same, MSIL is expected to sustain its monthly runrate over the 1.1lac unit mark for the remaining 7 months.
™ New launch is expected in the premium sedan car segment in Q4FY11.

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bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb
Mahindra & % Chg % Chg April10- April09-
Mahindra Aug-10 Aug-09 Y-o-Y July-10 M-o-M Aug10 Aug09 %Chg
Three
Wheelers,GIO,Maximmo 5,074 3,652 38.9 7,824 -35.1 22,660 16,490 37.4
UV-Scorpio,
Xylo,Bolero,Pick ups 20,527 16,631 23.4 16,720 22.8 1,01,509 82,039 23.7
MNAL LCV 873 658 32.7 1,007 -13.3 4,858 4,171 16.5
MRPL Logan 801 469 70.8 752 6.5 2,869 2,391 20.0
Total Domestic 27,275 21,410 27.4 26,303 3.7 1,31,896 1,05,091 25.5
M&M Exports 1,228 653 88.1 1,296 -5.2 5,649 2,304 145.2
MRPL Exports 400 350 14.3 450 -11.1 1,500 450 233.3
Total Vehicles 28,903 22,413 29.0 28,049 3.0 1,39,045 1,07,845 28.9
Tractors 13,435 10,646 26.2 14,592 -7.9 78,175 66,881 16.9
TOTAL 42,338 33,059 28.1 42,641 -0.7 2,17,220 1,74,726 24.3

™ M&M’s August numbers are decent. Though contraction is seen on a MoM BASIS, the underlying trend remain
robust
™ Three-Wheelers sees sharp contraction MoM. Infact it is the lowest monthly sales if we take this year into
consideration. But the numbers are still above its Dec 09 sales.
™ UV segment sees a impressive growth. August sales are its highest ever-monthly sales post March 2010.
™ LCV sales are back to its pre May 2010 levels. Tata Motors leads this segment.
™ One major trigger for MNAL would be once it starts selling its TRUCKS. As of now the company has built 200
TRUCKS, but will start selling once its orderbook touches 500units. A new launch is expected from MNAL, which
would be sold by MVML.
™ We see a continued growth in Logan, both, in domestic and export markets, post the discount in prices.
™ Domestic sales sees its highest ever sales post March 2010.
™ New Launches – A M&HCV from MNAL, SUV from Chakan (MVML) and 6-7 variants between Xylo and Maximmo
™ Exports show a marginal slowdown. But the underlying trend remains robust
™ Tractor sales have seen a declining trend post May 2010. But if we see its YoY numbers, the growth rate is intact
with higher contribution from exports.

bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb

% Chg % Chg April10- April09-


TATA MOTORS Aug-10 Aug-09 Y-o-Y July-10 M-o-M Aug10 Aug09 %Chg
M&HCV 14,851 11,118 33.6 15,256 -2.7 72,263 48,402 49.3
LCV 20,734 18,644 11.2 20,438 1.4 96,245 81,824 17.6
TOTAL CV 35,585 29,762 19.6 35,694 -0.3 1,68,508 1,30,226 29.4
UV 2,884 2,609 10.5 3,251 -11.3 15,782 13,328 18.4
Cars 22,312 14,755 51.2 24,613 -9.3 1,09,511 67,064 63.3
Total PV 25,196 17,364 45.1 27,864 -9.6 1,25,296 80,392 55.9
Total Domestic
Vehicles 60,781 47,126 29.0 63,558 -4.4 2,93,804 2,10,618 39.5
Exports 5,157 2,684 92.1 4,241 21.6 21,641 10,360 108.9
TOTAL 65,938 49,810 32.4 67,799 -2.7 3,15,445 2,20,978 42.7

™ Tata Motors numbers are good as the nos come on a high base.
™ Strong demand continues for its LCV’s, with MoM sales on an uptrend.
™ Its M&HCV, though, sees a contraction MoM, the underlying trend remains strong with numbers still above May
2010.
™ Sharp contraction is seen in its UV segment, taking the unit sales back to its Pre Jan 2010 levels.

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™ The PV segment has performed well YoY with Nano offtake improving by 2x. But on a sequential basis, we have
seen a marginal dip in Nano, Indica and Indigo sales.
™ Indigo and Indica sales slacken MoM, but on a YoY basis Indigo sales are up by 100%
™ Its exports have seen a phenomenal growth til date. Infact August has seen a pick up in exports, taking the sales
to its peak for the year.
.

Note: Sale numbers yet to be declared for Ashok Leyland & Bajaj Auto

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Special Report

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