Auto stocks gain as Maruti Suzuki increases production in November

Shares of automobile companies gained on Monday after Maruti Suzuki India (MSI) increased its production in November. At 10:30 AM, the S&P BSE Auto index climbed 1.5 per cent as compared to a flat benchmark S&P BSE Sensex and was the top gainer among BSE sectoral indices.

Among individual stocks, Maruti Suzuki India, Tata Motors, and Motherson Sumi rose over 2 per cent each. Eicher Motors, Ashok Leyland, Mahindra & Mahindra, TVS Motor, Hero MotoCorp were all up in the range of 1-2 per cent, while Bajaj-Auto was also trading higher.

Maruti Suzuki India (MSI) increased its production in November by 4.33 per cent, after having reduced output for nine straight months due to lower demand.

The company produced a total of 141,834 units in November as against 135,946 units in the year-ago month, MSI said in a regulatory filing. Passenger vehicles' production last month stood at 139,084 units as against 134,149 units in November 2018, an increase of 3.67 per cent, it added.

In October, the automaker had cut its production by 20.7 per cent to 1,19,337 units.

Similarly, in September the automaker reduced its production by 17.48 per cent to 1,32,199 units.

“Shifting of segment of new WagonR from Mini to Compact impacted the segmental sales volume. MSIL’s overall sales performance is slowly getting better, while the company also indicated strong improvement in enquiry level over the past 2-3 months. Company’s retail sales grew by single-digit year on year during the festive season,” analysts at Reliance Securities said in November auto sector update.

Auto companies expect car sales to hit slow lane for some months

March was yet another weak month for automobile companies as car buyers postponed purchases amid uncertainty ahead of the Lok Sabha election and tepid economic indicators.

The new financial year (2019-20, starting Monday) seems unlikely to offer relief and sales are expected to remain in the slow lane till a post-election government takes charge. Dispatches at most companies, with the exception of a few, were either muted or fell, amid a pile of unsold stock (auto companies in India count dispatches to dealers as sales).

Cumulative sale at India's top six passenger vehicle (PV) makers dropped 0.7 per cent to 267,000 units, from 269,000 a year before. Higher cost of financing, with higher premium outgo on insurance, are among the factors weighing on buyer sentiment.

PV sales had also dropped 1.1 per cent in February, the seventh decline in eight months.

This has prompted the Society of Indian Automobile Manufacturers to say they would not be meeting even their scaled-down forecast of a six per cent rise for 2018-19.

March sales at car market leader Maruti Suzuki India dipped 0.75 per cent to 147,613 units from a year before. Led by a 6.9 per cent drop in sale of passenger cars — Baleno, Swift, Dzire and Ciaz, among other models. However, helped by the new-generation Ertiga, its utility vehicle segment grew at a brisk 12.3 per cent over a year. 

In an indication of weak macro economic indicators, the growth of India's eight core sectors had slowed to 2.1 per cent in February, due to a fall in output of crude oil and refinery products.

Mitul Shah, vice president, research, at Reliance Securities, said he expected 2019-20 to see a rise in only mid-single digit for PV sale, with a slowdown till the next festive season. "Demand is expected to pick up marginally in the second half of the (financial) year as pre-buying takes effect ahead of the BS-VI emission norms from April 2020,” he said.

The sales drop was higher at other companies than Maruti. 

chart Domestic sales at Hyundai Motor India dropped 7.6 per cent to 44,350 units over the same month a year before. Tata Motors' PV sales skid 12 per cent to 17,810 units. The company attributed it to “continued low consumer sentiment”.

New model launches, particularly of the XUV3OO, a compact SUV, helped Mahindra & Mahindra remain on a positive sales trajectory.

The maker of the Scorpio and Bolero sold 27,646 units during March, up four per cent over a year before. Honda Cars India was another exception, with sales at a fast pace on the back of new launches such as the Amaze. The local arm of the Japanese car maker saw deliveries to dealers increase 27 per cent over the same month last year.

Toyota Kirloskar Motor ended the year on a muted note. It sold 205,279 units in March, up two per cent over the past year.