Despite a sustained positive demand across segments in February, as per analysts, auto retails are expected to witness a moderate drop in customer inquiries sequentially, especially in the passenger vehicles (PV) and commercial vehicles (CV) segments. 

According to a Motilal Oswal report, there has been an 8-10 percent drop in the enquiries across PV OEMs, which should result in a sequential volume decline for the month. However, overall sentiments are still positive as booking trends continue to be healthy, the report added. 

“While there has been a supply chain improvement across OEMs, AMT variants for most of the models are still under long waiting periods. Overall, PV retails are expected to grow 6-8 percent YoY,” analysts at the brokerage firm said. 

As per Emkay Global analysts, retail sales for the PVs moderated sharply on a year-on-year basis with a corresponding increase in discount levels, albeit lower than peak periods. 

Among OEMs, the firm estimates domestic volumes to grow by 18 percent YoY for M&M, 7 percent for Maruti Suzuki, and 20 percent for Tata Motors. "Maruti Suzuki recently unveiled two products, Fronx and Jimny and received a healthy response; dispatches will begin in Q1 FY24. Blended vehicle discounts have been on an increasing trend with moderating retail growth; though, these discounts still remain below earlier peak levels," the analysts added.

On similar lines, Nomura also estimates retail sales to be lower than the wholesales, leading to inventory addition of about 30,000 units. "Slowing demand is in sync with our view of PV industry growth to slow down to about 6 percent YoY in FY24 as compared to 25 percent growth in FY23," Nomura analysts said.  

Likewise in the CV segment the conversion of inquiries is getting delayed due to a decline in demand from segments such as agriculture, while demand from other industries remained stable. Depending on the geographies, fleet utilization rate ranges between 75 percent and 78 percent. Infrastructure and construction-led demand continues to remain strong, resulting in better demand for higher tonnage vehicles. 

“We are yet to see a broad-based recovery, especially through new fleet additions. We noted that inventory levels are at 15-17 days as compared to 28-30 days till December 2022. This is a result of inventory management, due to the upcoming BS VI - II norms in April,” Motilal Oswal analysts said. 

Among the CV OEMs, Emkay Global expects Ashok Leyland to remain an outperformer with market share gains (as per Vahan) due to a favorable mix and enhanced marketing efforts. It foresees a growth of 43 percent YoY for Eicher Volvo Commercial Vehicle, 24 percent for Ashok Leyland, 4 percent for M&M, and 1 percent for Tata Motors in the domestic market.

However, dealer surveys by the brokerage firms indicated some pre-buying for CVs as prices are likely to rise by 3-4 percent from April post the implementation of RDE norms. 

Driven by a healthy uptick in the urban markets, coupled with the marriage season in northern regions, two-wheeler demand is likely to witness a slight improvement in February. This is expected to drive about 17 percent YoY growth in retail volumes, as per the report. 

Additionally a low base due to chip shortages especially related to anti-lock braking systems in the same month last year will also aid the volume growth in this month . However, OEMs are going slow on dispatches as model changes are happening due to OBD2. 

"Domestic volumes are expected to improve by 45 percent for Bajaj Auto, 29 percent for Eicher Motor-Royal Enfield, 23 percent for TVS Motor, and 6 percent for Hero Moto Corp," Emkay Global said. 

Going forward, dealers are cautiously optimistic about sales in upcoming months due to the looming risk of El-Niño which is likely to weaken the monsoon this year. “Rural incomes will be impacted by weaker monsoons and therefore impact entry segment cars, two-wheelers and tractors demand," the Nomura report added.