Auto sales volume that registered sequential growth in January 2009 extended the good performance into February 2009 receiving a boost from the stimulus package announced by the government in December 2008.
The government’s third stimulus package announced in February 2009 also aided the growth. This package maintained the 4% Excise Duty cut announced in December 2008 while proposing an additional 2% Excise Duty cut on Trucks and foundry products.
This was supported by the low interest rate scheme offered by large PSU banks during the month, which helped attract customers who had delayed their purchases due to the high cost of finance.
Hero Honda and Maruti reported the best numbers for February 2009 posting volume growth of 24% y-o-y indicating strength of their market reach and better performance by the rural segment.
Tata Motors and M&M improved their volumes sequentially but, on a y-o-y basis the companies continued their negative growth.
Overall, the industry has exhibited a positive trend in volume growth over the last two months. However, we are skeptical about sustainability of the high y-o-y growth registered by select counters including Maruti Suzuki and Hero Honda.
We believe that the upward trend will be confirmed with the auto companies reporting a gradual positive trend in volumes over the next couple of months.