Post Demonetization, Auto Sales Will Settle During Dec

Auto sales data for the month of December month will

be a significant one since demonetization drive impact is
likely to settle down whereas the commercial vehicle
business, in the next three-four months will be keenly
watched especially ahead of change in emission norms.
The coming 3-4 months will be extremely volatile for
commercial vehicle industry since the negative effects of
demonetization could be partially offset by a pre-buy before the introduction of
higher emission norms from April-2017. Another concern is that, as per current
notification by government, BSIII trucks cannot be 'registered" after April 1,
2017. Manufacturers see this to be "production" deadline. Other than that, there
will not be much time to pre-buy and production switch over will be required by
January-February
2017.
Talking about Tata Motors, China luxury tax impact on EBITDA is will be less
than 1 percent even if around 20 percent of buyers shift from Range Rover to
Range Rover Sport. China has levied a 10 percent luxury tax on vehicles costing
above CNY 1.3 million (Chinese Yuan). Coming to JLR, only Range Rover is
sold at a price of over CNY 1.58 million and it can be affected. But this impact
will be slight owing to the fact that it contributes around 2.4 percent of UK
production.
On the other hand, Maruti Suzuki, Eicher Motors and to some extent Ashok
Leyland performed well but the impact of currency demonetization was largely
seen in Hero Motocorp, Bajaj Auto, TVS Motor, Tata Motors and M&M.
Channel re-stocking post festive season and continued waiting period for Baleno

& Vitara Brezza aided Maruti to outperform in November, facing 12.2 percent
sales
growth
Y-o-Y.
Eicher Motors- Eicher Motors retained its lead in 2-wheeler space, clocking a 41
percent growth in spite 8 percent fall in bookings as compared with SeptemberOctober average. But, financing share has gone up from 35-40 percent earlier to
43 percent while cash purchases fell from around 40 percent to 10 percent.
Nonetheless, medium & heavy commercial vehicles industry failed to make a
mark in the last month since the volumes went down 12 percent.
Intraday on Friday, Eicher Motors share price settled above 2 percent at Rs.
22,756.20.
Ashok Leyland - After registering 17 percent growth in October, Ashok
Leyland's growth moved slowly to 10 percent. Ashok Leyland share price dipped
more
than
3
percent
and
was
trading
at
Rs.
75.05.
Tata Motors- Tata Motors reported a sharp 23 percent decline and VECV
showed 13 percent fall in overall CV volumes. Commercial vehicle companies'
commentary showed that fleet owners have postponed purchases because the cash
crunch and this can keep near-term demand muted. Following the path of Ashok
Leyland, even Tata Motors share price dipped more than 2 percent.
Mahindra & Mahindra- On the other hand Mahindra hit the hardest not only on
auto front but also in tractor business, down 21-22 percent because of severe cash
crunch in rural parts of the country, which contributed the most to its overall
business.
Mahindra
share
price
too
fell
1.13
percent.
In two-wheeler space, Hero Motocorp's sales declined 12.9 percent, TVS Motors
down 0.5 percent and Bajaj Auto slipped 13 percent.

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The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of the research
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Article Written by
Madhurima Chowdhury