Heatwave, elections, weak marriage season may dampen auto sales in May: Nomura

Analysts expect no revival in small car demand, while SUVs are predicted to continue gaining market share over the next few years.
 

Automobile players like M&M, Maruti Suzuki, Bajaj Auto, and Tata Motors will announce their May 2024 sales figures on June 1. Nomura analysts predict a 6 percent year-on-year (YoY) growth in passenger vehicle (PV) wholesales, reaching 3.5 lakh units. This increase is expected to elevate inventory levels to over one month's supply, signifying a crucial post-Covid milestone.

Moreover, analysts expect no revival in small car demand, while SUVs are predicted to continue gaining market share over the next few years.

In terms of individual automobile players, Maruti Suzuki's domestic PV wholesales is expected to be flat YoY in May. "Maruti faces market share risk in FY25F as the new model cycle is not as strong as last year and there will be more new launches by competition," analysts said.
On the other hand, M&M's UV volumes are expected to rise 37 percent YoY in May, led by production ramp-up of newly-launched XUV 3XO. However, . M&M’s tractor volumes are likely to be down 3 percent YoY in May 2024.
 

In the two-wheelers space, Bajaj Auto is expected to report 4 percent YoY growth in volumes led by rising exports. "Going ahead, we expect Bajaj Auto to benefit from the ramp up of Pulsar 400z, a CNG bike in June 2024, Triumph, and affordable EV Chetak," they noted.

TVS Motor, meanwhile, is likely to report 19 percent YoY growth in domestic market and 8 percent growth in export volumes.

While fundamental drivers like GDP growth, capex cycle and e-way bill growth remain positive, impending general elections are likely to keep things slow in the near term, said Normura analysts. Thereby, they expect Ashok Leyland to be up 15 percent YoY in the medium and heavy commercial vehicle segment, while Tata Motors’ volumes should be up 22 percent YoY on a low base.

Amid these projections, analysts have identified potential challenges ahead, including margin pressures due to rising commodity costs, especially in Q2FY25. Furthermore, ongoing elections, along with seasonal factors such as heat and a weak marriage season, may have dampened sales in May.