Auto stocks are on a roller-coaster ride! Uncover the twists and turns that have sent them plummeting.
September 2023 wholesale sales numbers are out; it was a mixed bag of excitement and disappointment. What happened next was that the auto stocks dipped significantly. If we look at some data, in the past five trading sessions, from September 28 to October 5, the Nifty Auto Index has been underperforming the Nifty 50. To be precise, while Nifty 50 has given a -0.88% return, Nifty Auto has offered a return of -2.21%.
The graph shows that Nifty Auto has underperformed Nifty 50 in the past five trading sessions.
So, the question for today is, why are auto stocks falling, and what lies ahead for them?
What’s Happening?
Prominent auto manufacturers witnessed a drop in their stock prices in the past five trading sessions from September 28 to October 5, 2023.
Maruti Suzuki India’s stock price declined by -3.97%, while Mahindra and Mahindra saw a -2.73% decrease. Bajaj Auto also experienced a decline of -1.30%
Interestingly, although initially impacted, Tata Motors displayed signs of a swift recovery on October 5, 2023.
You might be wondering, what went wrong with auto stocks? Well, the reason lies in the September auto sales data.
Let’s understand more about it.
September 2023 Auto Sales Numbers
Two Wheelers
Let’s look at how different companies are doing when it comes to selling two-wheelers (like motorcycles and scooters).
Some companies that make mass-market two-wheelers are not selling as many as they used to. Their sales have either stayed the same or gone down compared to last year.
For example, Bajaj Auto’s sales went down by 9%. This happened because last year, they dispatched a lot of two-wheelers to their dealers for inventory buildup after a severe shortage of semiconductors, according to Business Standard and BQ Prime.
On the other hand, Hero Motocorp’s sales increased by 2.4%, and Tata Motors saw a 5.9% increase compared to last year.
Now, let’s talk about Eicher Motors Ltd. Their total sales decreased by 4% in September. Most of this decrease was in bikes with smaller engines (up to 350cc), which saw a 5% drop. However, bikes with bigger engines (over 350cc) actually went up by 4%, as per The Free Press Journal.
Passenger Vehicles and Commerical Vehicles
Just like the two-wheeler market, the passenger vehicle market had mixed results. Let’s break it down.
Maruti Suzuki had an overall increase in sales by 2.8% compared to last year. But here’s something interesting – in the ‘mini’ segment, which includes cars like Maruti Suzuki Alto and S-Presso, sales dropped by a 65%! That’s a big decrease.
Now, let’s talk about utility vehicles. These are vehicles designed for specific tasks, often like small trucks with openbacks. People seem to love them because this segment saw incredible growth – a 82% increase compared to last year, as reported by The Times of India. It looks like customers are leaning towards these versatile vehicles.
In the Medium and Heavy Commercial Vehicle (M&HCV) category, Ashok Leyland recorded sales of 10,266 trucks in September 2023. That is a 3% increase from the 9,927 units they sold in September 2022, as per Mint.
Lastly, let’s talk about tractors. Tractor sales were doing really well at the start of the year, with a robust 24.4% increase compared to the previous year. But things changed, and by April, sales had dropped to a negative 11.1%. As of August 2023, tractor sales were up by just 1.1%, as reported by Economic Times.
What’s Next?
The Medium and Heavy Commercial Vehicle (M&HCV) segment experienced significant growth in 2023. This growth was powered by several factors, including the government’s ongoing efforts to boost infrastructure, strong demand for vehicle replacement, expansion in essential industries, and steady support from the e-commerce sector.
There’s optimism that the demand for the entire auto segment might surge during the upcoming festive season.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The stocks mentioned are for information purposes only. This is not an investment advice.
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