Local Lockdowns To Dent Automobile Month-on-month Wholesale Numbers

Automobile wholesale numbers are expected to decline on a MoM basis due to localised lockdowns by states and supply-side issues said Motilal Oswal Financial Services.

According to the MOFSL report, in May inquiries were significantly lower than normal levels, except in 'Tractors'.

"While a strong order book and ongoing preference for personal mobility would support PVs, strong demand for 2Ws seems unlikely on high inventory in the system and severe impact of the second Covid wave on rural and semi-urban markets," the report said.

"Wholesales are expected to decline MoM due to the impact of localised lockdowns by states and supply-side issues."

Besides, it said that 2W demand continues to remain subdued, with dealer inventory at 30-60 days.

"Demand momentum in PVs is expected to resume once the lockdown is lifted as inventory levels are below normal (less than 30 days), with a waiting period of 6-8 weeks in fast selling models. Demand for M&HCVs remains strong in the Infrastructure segment (considering inquiries in the current market), while the same in the Cargo segment has slowed down."

"Tractor demand has largely sustained on the Agriculture side, but Commercial demand has slowed down."

Furthermore, it said that though May 2021 has been impacted by Covid-led lockdown across segments, volumes are expected to recover with the gradual lifting of lockdown restrictions.

"Current valuations largely factor in a sustained recovery (our base case), leaving a limited margin of safety for any negative surprises. We prefer 4Ws over 2Ws, as PVs are the least impacted segment currently and offers a stable competitive environment."

"We expect the CV cycle recovery to sustain and gain momentum. We prefer companies with: higher visibility in terms of a demand recovery, a strong competitive positioning, margin drivers, and balance sheet strength." --IANS

rv/sn/ash

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor