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Local lockdowns to dent auto wholesale numbers
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SME Times News Bureau | 31 May, 2021
Automobile wholesale numbers are expected to decline on a MoM basis due
to localised lockdowns by states and supply-side issues said Motilal
Oswal Financial Services.
According to the MOFSL report, in May inquiries were significantly lower than normal levels, except in 'Tractors'.
"While
a strong order book and ongoing preference for personal mobility would
support PVs, strong demand for 2Ws seems unlikely on high inventory in
the system and severe impact of the second Covid wave on rural and
semi-urban markets," the report said.
"Wholesales are expected to decline MoM due to the impact of localised lockdowns by states and supply-side issues."
Besides, it said that 2W demand continues to remain subdued, with dealer inventory at 30-60 days.
"Demand
momentum in PVs is expected to resume once the lockdown is lifted as
inventory levels are below normal (less than 30 days), with a waiting
period of 6-8 weeks in fast selling models. Demand for M&HCVs
remains strong in the Infrastructure segment (considering inquiries in
the current market), while the same in the Cargo segment has slowed
down."
"Tractor demand has largely sustained on the Agriculture side, but Commercial demand has slowed down."
Furthermore,
it said that though May 2021 has been impacted by Covid-led lockdown
across segments, volumes are expected to recover with the gradual
lifting of lockdown restrictions.
"Current valuations largely
factor in a sustained recovery (our base case), leaving a limited margin
of safety for any negative surprises. We prefer 4Ws over 2Ws, as PVs
are the least impacted segment currently and offers a stable competitive
environment."
"We expect the CV cycle recovery to sustain and
gain momentum. We prefer companies with: higher visibility in terms of a
demand recovery, a strong competitive positioning, margin drivers, and
balance sheet strength."
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