August auto sales preview: Two-wheelers and tractors may perform better; passenger and commercial vehicles likely to struggle

As the auto industry prepares to release its August sales figures, expectations are mixed, with analysts predicting subdued overall volumes. The sales data, expected on Sunday, September 1 or Monday, September 2, is likely to reflect mixed results across vehicle segments, with two-wheelers and tractors likely to outperform commercial and passenger vehicles.

The poor performance of the passenger vehicle and commercial vehicle segments can be attributed to rising commodity costs, which have significantly impacted the sector’s results.

Specifically, passenger vehicle costs have increased by 20 basis points month-on-month, while the two-wheeler segment has seen a more significant increase of over 100 basis points. These cost pressures, coupled with elevated inventory levels, currently hovering between 40-50 days, have contributed to the poor sales outlook.

However, there is optimism that inventory levels could normalise as demand picks up during the festive season, which is traditionally a strong sales period for the automotive industry. Two key factors fuelling this optimism are improving rural sentiment and a favourable monsoon, with rainfall so far recorded 7% above normal levels. These conditions are expected to boost consumer confidence and spending, particularly in rural areas.

In the two-wheeler segment, Bajaj Auto is expected to report a 10% YoY increase in sales, along with an 11% MoM increase. Hero MotoCorp’s sales are projected to remain flat YoY, but show a 16% MoM increase. TVS Motors is also anticipated to register a 10% YoY growth, with an 8% MoM increase. On the other hand, Royal Enfield may see a 6% YoY decline in sales and a 1% MoM drop.

The commercial vehicle and four-wheeler segments are expected to face challenges. Maruti Suzuki’s sales are projected to decline 5% YoY and remain flat MoM. M&M is likely to see a modest YoY increase of 2% but a 1% MoM decline. Tata Motors and Ashok Leyland are anticipated to report declines in sales both YoY and MoM, reflecting the broader challenges in these segments.

In the tractor segment, M&M is expected to register a 6% YoY increase, though sales could fall by up to 12% MoM. Escort is projected to register a 1% YoY increase in sales, with a 4% MoM increase.

Despite mixed sales results, the stock market has shown resilience. Most auto stocks have seen gains recently, with the Nifty Auto index trading near all-time highs.