INDIAN AUTOMOBILE INDUSTRY

Strong growth visible across segments in April 2016

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Domestic Volume Growth Trends in April 2016

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Passenger Vehicle volumes grew by 11.0% in April 2016 on YoY basis

Commercial Vehicles volumes grew by 17.4% in April 2016 on YoY basis
Two-Wheeler volumes grew by 21.2% in April 2016 on YoY basis
Three-Wheeler volumes grew by 36.7% in April 2016 on YoY basis
Tractor volumes grew by 15% in April 2016 on YoY basis

May 11, 2016

ICRA Research Services

Summary
Passenger Vehicles: Strong UV growth on back of new model launches offsets tepid Car demand
Domestic Passenger Vehicle (PV) industry registered robust 11% growth during Apr-16, thanks to whopping 43% growth in UV segment whereas growth in passenger car segment
remains tepid at 2%. In March 2016, MSIL launched Vitara Brezza in compact UV segment, which also propelled growth. Given, most of the launches in compact UVs were
witnessed post Jul-15; the growth in compact UV segment will be in strong double digit during Q1FY2017 owing to low base of Q1FY2016. This is also reflected in 101% growth in
compact UV segment during Apr-16 as compared to 21% decline in larger UVs over the same period. Baleno has turned out to be major volume contributor for MSIL and it
contributed 20% of MSILs compact/super compact volume segment during Apr-16. With launch of Tiago in compact segment, TML could witness some market share gains in near
term which otherwise is on declining curve over last 2-3 quarters. Export volume grew by 6.6% YoY in Apr-16 as robust exports from Ford, GM and VW offset declining exports from
key players like Hyundai and MSIL.

Two Wheelers: First month of fiscal year 2017 started off on a healthy note
The domestic two wheeler industry reported a healthy 21.2% YoY growth in April 2016 primarily driven by uptick in both rural and urban demand along with favorable performance
by majority of the new launches from OEMs. Although the motorcycle segment reported healthy YoY growth of 16.2% in April 2016 in the domestic market, the growth continued to
be fuelled by the scooter segment which posted stronger YoY growth of 35.9% in April 2016. The growth in scooter sales has been supported by the continuing traction of Honda
Activa, as well as good response for the recently launched models of Hero Maestro Edge, Hero Duet and Yamaha Fascino. Moped sales in the domestic market reported modest
growth of 10.7%, supported by launch of TVS XL100. Continued weakness in crude oil price in African markets and high inflation in Latin American region the key export markets for
Indian OEMs led to muted demand in both these regions resulting in exports reporting a dip in volumes by 10.8% YoY in April 2016. With four months of consistent growth, the
downtrend in two wheeler industry seems to have been arrested, although recent months benefitted from early marriage season (March- April), regional new years (in April), arrival
of rabi harvest besides the expectation of a good monsoon to aid rural demand and continued uptick in urban demand.

Commercial Vehicles: Domestic CV industry registered a volume growth of 17.4% in April 2016 on YoY basis aided by growth across segments
During April 2016, the domestic CV industry sales registered a growth of 17.4% in volumes in comparison to 6.5% in April 2015. The strong growth was driven by continuation of
healthy replacement-led demand in case of M&HCV (Trucks) as well as some pick-up in demand from mining and construction-driven sectors. In addition, the industry also continues
to benefit from the gradual implementation of BS-IV emission norms and would cover the entire country by April 2017. The demand for LCV (Trucks) also started picking up from H2
FY 2016 after declining for past two years and registered a growth of 14.2% in April 2016. The bus segment, which accounts for 13% of industry volumes, registered a growth of 10.8%
during the same period on back of healthy demand from SRTUs and Private Operators. In terms of market share, Tata Motors continued weaken in the LCV segment on back of strong
traction for M&Ms new launches and market shift in favor of Pick-up Trucks. In the bus segment too, competition has increased over the past few years due to foray of new OEMs.

Three-Wheelers: Domestic three wheeler volumes bounced back, while exports declined due to challenging macro-environment in some key markets
After witnessing a declining trend since the beginning of the current fiscal, the domestic three-wheeler volumes grew by 13.8% in H2 FY2016 aided by fresh permits issued for
passenger variants by some of the states. This trend continued in April 2016 as well. However, comparatively, exports declined sharply by 62% in April 2016 account of challenging
market conditions, particularly in the African markets, which account of sizeable proportion of three wheeler exports from India. Overall, in line with pick-up in domestic demand,
ICRA expects the domestic three wheeler industry volumes to grow around 8-10% in FY 2017e, while exports to remain subdued.

Tractors: Sales recover in April, albeit on low base, benefitting from festive mood in select regions
The demand in the market continues to be marred by weak farm sentiments, a result of stressed farm incomes on account of consecutive crop failures, a second consecutive year of
weak south-west monsoon as well as only a modest increase in MSPs of various crops. Non-agri demand pull continues to remain subdued with slow pick-up in pace of infrastructure
and construction activity. Tractor volumes have shown positive growth rate since February 2016, riding on growth in select states driven by region specific factors. The growth can be
attributed primarily to a low base; an improvement in farm sentiments on account of healthy monsoon forecast as well as festive impact (regional new years being celebrated pan
India- Uggadi in South India, Gudi Padwa in Maharashtra, Baisakhi in North India) have also helped the industrys volumes to an extent. On the exports front, continued healthy
demand from U.S. and near-by markets has helped industry record moderate growth. M&M witnessed a growth of 19% in April 2016, after its volumes declined by 8.7% in FY2016.
Escorts, which registered a decline of 13.9% in volumes in FY2016, also recorded a growth of 7.6% in April 2016.
ICRA Research Services

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