Demand recovery for automobiles in India continues in third quarter: Report
The demand recovery for automobiles continued in the December quarter, with strong momentum witnessed in retail sales of tractors and passengers vehicles, according to a report.
According to the report by brokerage Motilal Oswal Financial Services, the recovery in sales has been stronger than expected across segments, excluding the three-wheelers, driven by pent-up demand, positive agri-economics and a shift to private from public transport.
On a wholesale basis, the report estimates tractor volumes to grow by 22 per cent year-on-year, passenger vehicle segment demand to rise 15 per cent, and two-wheelers 19 per cent on a low base of last year, it said.
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Among the commercial vehicle segment, the light commercial vehicle demand is estimated to grow 1.5 per cent, while the decline is getting smaller for medium and heavy commercial vehicle (M&HCVs) with an estimated eight per cent drop during the third quarter, as per the report.
Three-wheelers are witnessing a quarter-on-quarter recovery in volumes.
"However, we do see near-term uncertainties on account of factors such as supply-side disruption due to a global shortage of semi-conductors, sharp commodity cost inflation led price increases, as well as risk to demand (from a price hike, fading benefit of COVID-19 to private transport, among others)," the report said.
The brokerage firm also said it expects the volume recovery in all segments to sustain in FY22, with core demand growing 5-7 per cent for two-wheelers/passenger vehicles/tractors, supported by the benefit of the low base of April-August 2020.
For the three-wheelers and commercial vehicles, a sharp recovery is expected in FY22.
"We expect the recovery in EBITDA margins to continue for the second straight quarter despite the initial impact of commodity cost inflation," it said.