Increase in petrol and diesel prices is likely to have a bearing on automobile demand which would reflect in March auto volumes set to be announced today. The commercial vehicle (CV) segment, which is currently seeing a cyclical recovery, is not immune to that.
“Crude oil price has started impacting retail figures adversely with some cancellation of bookings and postponement of orders. Transporters are expecting retail diesel price to increase by Rs10-15/liter, narrowing the retail and wholesale price gap" said analysts at Motilal Oswal Financial Services in a report.
Having said that, CV volumes could see a rise owing to depreciation benefits that will accrue to fleet operators when purchased before the start of next financial year, point out analysts at Nomura Financial Advisory and Securities (India) Pvt. Ltd in a report. Also, there are possibilities of increased buying owing to potential price hikes in April in the backdrop of increasing raw material costs. Accordingly, Nomura analysts expect Tata Motors Ltd and Ashok Leyland Ltd to report 7% and 2% year-on-year (y-o-y) growth in CV volumes respectively.
In the passenger vehicle (PV) segment, supply chain constraints have eased sequentially. The demand is improving and is more inclined towards CNG (compressed natural gas) variants amid rising cost of ownership. Maruti Suzuki India Ltd could be a beneficiary of this shift in trend. However, analysts at Motilal Oswal expect Maruti Suzuki volumes to remain flat y-o-y due to lower domestic demand offset by growth in exports. Mahindra & Mahindra Ltd’s (M&M) utility vehicle volumes and Tata Motors PV volumes are foreseen to increase by 44% and 54% y-o-y respectively.
Meanwhile, the demand for two-wheelers (2W) and tractors is anticipated to continue the subdued trend seen in February. Analysts at Motilal Oswal expect tractor volumes to decline by 32% and 47% y-o-y for M&M and Escorts Ltd respectively, owing to high base and weak demand.
In the case of 2Ws, higher fuel prices are adding to the woes. “Industry retail registrations could be down about 8% y-o-y in Mar 2022, in our view, which is about 27% below even Mar-18 levels" added the Nomura report. Analysts estimate wholesale volumes to decline by 22% and 23% y-o-y for Hero MotoCorp Ltd and Bajaj Auto Ltd respectively. TVS Motor Co. Ltd volumes are expected to decline by 3% while Eicher Motors Ltd (Royal Enfield) volumes are foreseen to rise by 6%.
On the other hand, rising fuel prices could accelerate the adoption of electric vehicles (EVs). The share of 2W EVs in March reached 4.2% vis-a-vis 3.3% in February 2022, accoNomura analysts. They further added, “There could be upside risk to our estimate of ~4%/8%/10% EV share in FY23F/24F/25F with more launches and increased capacities." Even so, increasing battery costs would be a key monitorable.
