Covid Caused Movement Restrictions to Inhibit Auto Sales

Emkay Global anticipates revival from April of FY22. Tractors sales may be higher due to channel filling

Covid Caused Movement Restrictions to Inhibit Auto Sales
Covid Caused Movement Restrictions to Inhibit Auto Sales
OLM Desk - 29 April 2021

As per a research report released by Emkay Global Financial Services, the auto sales for the month of April 2021 is likely to be impacted by Covid-19-related restrictions and lockdowns across several states. On a sequential basis, the volumes may be lower across segments. As volume numbers are not comparable year-over-year due to the complete lockdown last year, the comparison is against April 2019 numbers–Tractors and passenger vehicles are likely to be higher, while two-wheelers and commercial vehicles are expected to see a double-digit decline.

Passenger Vehicles(PV)

PV industry volumes should improve compared to April 2019 levels. Although retails are affected, healthy order book and inventory build-up with dealers have been supporting wholesales. The two-year compound annual growth rate (CAGR) for domestic volumes is expected at 43 per cent for Tata Motors and 4 per cent for Maruti Suzuki, while M&M could see a 13 per cent decline.


Tractor industry volumes should also improve from April 19 levels. Despite pressure on retails, channel filling would support wholesales. Two-year CAGR for domestic volumes is expected at 27 per cent for Escorts, while it is negative for M&M at -11per cent due to a high base.

Commercial vehicles(CV)

CV industry volumes are likely to be under pressure, owing to lower freight availability. The checks initiated by Emkay Global Financial Services indicate that transporters are holding back orders till there is clarity on easing of lockdowns. Two-year CAGR for domestic volumes is expected to decline at -10 per cent for EIM-VECV, -14 per cent for Tata Motors, -15 per cent for Ashok Leyland, and -15 per cent for M&M.


Two-Wheeler industry volumes are expected to be weak, as lockdowns resulted in the loss of student demand and a subdued festive season. Premium segment demand remains better than that of the entry level segment. Two-year CAGR for domestic volumes is expected at -11 per cent for Hero Moto Corp Ltd, -13 per cent for Eicher Motors-Royal Enfield, -15 per cent for Bajaj Auto, and -17 per cent for TVS Motors.

Demand Outlook

Near-term demand may remain subdued due to pandemic-related restrictions. However, Emkay Global expects recovery from Q2 FY22 onward. The positive view on the automobile sector is underpinned by expectations of a strong cyclical upturn, which is expected to last at least three years.

Emkay Global’s top picks among original equipment manufacturers (OEMs) are Tata Motors (TP: Rs375), Ashok Leyland (TP: Rs155), Maruti Suzuki (TP: Rs8,500), and Eicher Motors (TP: Rs3,300). In Ancillaries, they like Bharat Forge (TP: Rs760) and Apollo Tyres (TP: Rs306).


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