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Passenger vehicles volumes on way up

Maruti Suzuki’s domestic PV wholesale volumes in August are expected to be up by 33% y-o-y, according to analysts at Nomura Financial Advisory and Securities (India) (Photo: Mint)Premium
Maruti Suzuki’s domestic PV wholesale volumes in August are expected to be up by 33% y-o-y, according to analysts at Nomura Financial Advisory and Securities (India) (Photo: Mint)

Demand trends for the passenger vehicle (PV) segment appear healthy, at least in the near term. Indian automakers are set to announce their August sales volume numbers on Thursday. The easing of the semiconductor crisis would also support volumes.

Demand trends for the passenger vehicle (PV) segment appear healthy, at least in the near term. Indian automakers are set to announce their August sales volume numbers on Thursday. The easing of the semiconductor crisis would also support volumes.

Year-on-year (y-o-y) growth is partly aided by a favourable base as automakers faced acute semiconductor shortage in August 2021. But sequential momentum in volumes is likely to sustain.

Smooth ride
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Smooth ride

Maruti Suzuki India Ltd’s domestic PV wholesale volumes in August are expected to be up by 33% y-o-y, according to analysts at Nomura Financial Advisory and Securities (India). Tata Motors Ltd’s volumes are estimated to rise by 70% and Mahindra & Mahindra Ltd’s (M&M) utility vehicle volumes are expected to be higher by as much as 77% y-o-y, they said.

The improvement in the chip shortage situation translates into reduced delivery waiting time. This has shrunk for many models, pointed out analysts at Edelweiss Securities in a report dated 29 August based on their interaction with few dealers across north and west India. “Except for a few models such as Thar and XUV700, the waiting period ranges from one–three months (having more than halved)," they said. The longer waiting periods for sport utility vehicles is a key monitorable as there is a premiumization trend across the PV segment. For M&M, limited capacity and shortage of electronic parts are restricting its ability to fulfil orders.

Such long waiting periods for higher-end variants would weigh on overall margins in the upcoming quarters as the mix will be inferior. However, softening commodity costs should bring respite to margins.

The chip shortage situation is likely to normalize. Inventory correction in high volume chip segments such as personal computers and smartphones is freeing up manufacturing capacities, Nomura analysts pointed out. “This should result in a step up in production of chips in segments where supply is still tight, such as automotive and industrial, leading to normal supplies in a few months," they said.

Meanwhile, rising gas prices could hurt demand for compressed natural gas (CNG) vehicles. This may hurt Maruti where CNG forms a significant share of its total volumes. Shares of M&M and Maruti are now hovering near their 52-week highs helped by the optimism on the recent new launches. However, Tata Motors’ shares are 12% lower than their 52-week highs. A meaningful upside from current levels would depend on sustained volume growth across segments and also margin expansion.

ABOUT THE AUTHOR

Vineetha Sampath

Vineetha Sampath is a chartered accountant and is experienced in the field of research analysis. She joined Mint's Mark to Market team recently and this is her first stint in journalism.
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