Early festive season to boost September auto wholesales: Nomura

After two years of COVID, demand is expected to pick up this festive season. With the festive season starting early this year on 26 Sep 22 vs 7 Oct in 2021, Nomura sees strong sales helped by channel pre-festive filling, with passenger vehicle (PV) industry seeing the best ever wholesales at 350k units in Sep-22. With rising supply, there could be a slight drop in waiting periods, although top-end variant models still face high waiting periods.

In the PV segment, with the launch of Grand Vitara, MSIL's market share could improve further while domestic PV wholesales (ex OE and LCV) is going to be likely up 126% y-y (overall +107% y-y), the estimated industry wholesales is of ~350k units, implying ~42% market share for MSIL. Also, the company has pending orders of ~380k units currently, of which ~57k units are for the Grand Vitara.

The two-wheeler and entry-segment cars continue to show signs of weakness. Industry recovery remains slow, with wholesales below Sep-16 levels and retails below Sep-15 levels. However, growth will likely be driven by Bajaj Auto with 4% YoY growth overall and 35% YoY growth in domestic. Royal Enfield is likely to benefit from the positive reception of the Hunter 350 and channel filling. Hero Motocorp however is expected to be down 6% YoY , while TVSL’s wholesales is likely to be up 8% YoY.

The two-wheeler EV mix is expected to touch a new high of ~5% of the overall 2W industry in Sep-22, with Ola Electric likely to be the leader with sales of ~8.8k units. Two-wheeler EV share is expected to rise to ~4.7% FY23F and 8% FY24F.

In terms of cost, Nomura’s Commodity Cost Index is down ~250bp+ for PVs / 2Ws currently, vs Jun-22 levels. Moreover, OEMs have already taken price hikes of 1-2% in 1QFY23. As older contracts expire, strong margin benefit is expected from 2Q-3QFY23.