Weak CV demand persists, northern markets provide some support: Report

November 2024 witnessed mixed demand trends across segments. While the 2W industry continues to experience growth post the festive season, demand has certainly moderated on expected lines during the month. Tractor demand continues to recover, driven by healthy farm sentiments following a good monsoon and improving reservoir levels. Both 2Ws and tractor segments are reaping the benefits of positive rural sentiment. On the other hand, demand in PV and CV segments has weakened again post the festive season. However, the key positive was that inventory levels across categories reduced after decent festive growth, standing at 6-7 weeks for 2Ws, 5-6 weeks for PVs, and ~4 weeks for CVs, as per a report by Motilal Oswal.

The 2W segment experienced better-than-expected demand during the festive period (about 14%); however, the demand appears to have moderated post the festive season on expected lines. Some dealers indicated that the strong discount push during the festive season has led many customers to advance their purchases to this period. For Hero MotoCorp, feedback for Xtreme125R remains positive, although it is partly cannibalizing the sales of Super Splendor and Glamour. All discounts offered during the festive season have now been withdrawn.

For TVS Motors, the recently launched Jupiter110 has been well received by customers, with dealers now quoting a waiting period of 3-4 weeks on the model. TVS recently launched two variants of Raider (one with drum brakes and another top-end version), which have contributed to improving the model’s declining share. Average inventory levels have reduced by 1-2 weeks across most regions, which are now at 6-7 weeks for HMCL, 4-5 weeks for BJAUT and TVSL, and <4 weeks for HMSI.

PVs: This segment experienced a moderate demand pickup in the recently concluded festive period with about 7% YoY growth. This has also helped bring down inventory levels for most players in the industry to below 1.5 months. However, post the festive season, footfalls have again moderated back to H1 levels, and retail volumes for the month are expected to drop 8-10% YoY, primarily due to weakness in the entry-level segment across OEMs. Even in UVs, some dealers have indicated that they need to put in more effort to persuade prospective customers to convert a purchase compared to before. MSIL’s newly launched Dzire is generating strong customer interest given its refreshed looks and also aided by the company’s aggressive marketing efforts. However, given the recent launch, dealers are yet to get adequate supply of the model.

Dealers are confident that this model would beat sales run-rate of its outgoing variant. At Tata Motors, Curvv (ICE) is witnessing healthy inquiry levels. However, given the supply constraints, dealers are currently experiencing limited sales and quoting a waiting period of 4-6 weeks. However, its EV variant is not witnessing much pickup yet. For M&M, Thar Roxx continues to enjoy a waiting period of 4-6 months. Dealers highlighted that M&M has raised prices by INR30-50k for the top variants of XUV700, i.e. AX7 and AX7 L. Overall, for Nov’24, while M&M is expected to post 11% YoY growth in its UV dispatches (including pickups), dispatches for MSIL/TTMT to decline 1%/2% are anticipated.

CVs: Demand continues to be weak due to a lack of pick-up across most underlying segments, though partially offset by marriage season demand in northern regions such as Rajasthan and UP. The average fleet utilization has dropped to 75-80% from 85-90% during the festive period. Dealers anticipate volume growth from January, driven by rural demand and a low base effect in 4Q last year. Notably, despite the subdued demand, leading players such as AL and TTMT have maintained stable discounts (7-9% MoM), supporting profitability, with inventory levels at 30 days.