Automobiles Sector: Q4FY14 Results Preview

The last quarter of FY14 has remained weak for the automobile manufacturer. Excluding the two-wheeler and the tractor segment, the auto companies remained under pressure during this quarter. This could be due to sluggish economy, high inflation, high fuel prices and high borrowing rates.

During the Q4FY14, the total vehicle sales have shown an average growth of more than 5% as compared to the same quarter of previous year. The growth in total sales was on account of higher sales in the two wheeler segment. Two wheeler companies like Hero Motocorp and TVS has shown impressive growth.

On standalone basis Tata Motors during the last quarter of fiscal year 2014 has witnessed a 32% decline in volumes as compared to the same quarter of previous year.  The commercial vehicle segment was the major drag for the company. This segment has reduced by 39% during the Q4FY14 as compared to the same quarter of the previous year. The passenger vehicle segment has also seen a fall of around 9% during this quarter, while the performance of Jaguar Land Rover (JLR) was quite good. The sale volume in this segment was up by 8% to 124776 units during Q4FY14 as compared to same quarter of previous year.

Maruti Suzuki (MSIL) saw a 6% decline in sales in Q4FY14, as compared to Q4FY13. The compact car segment was the maximum gainer during this quarter. The compact car segment mainly from the sale of Swift, Estilo, Ritz, Celerio has seen a growth in sales at an average rate of 10% during this quarter as compared to the same quarter of previous year. The sale from the export has reduced by more than 5.5% during the last quarter of fiscal year 2014 as compared to Q3FY13. 

During Q4FY14 M&M also saw its volume under pressure, with total sales dipping by more than 9% on YoY basis. On yearly basis the domestic sales has dropped by more than 10% and the export has surged by more than 7%. The tractor segment of the company has also not performed well. The overall sales of this segment have grown by a mere by 0.47% on yearly basis during Q3FY14. The sale from the domestic market in this segment has remained at par, while the sales from the export have surged by more than 6% on YoY basis during the Q4FY14. 

The segment which has performed relentlessly well is the two-wheeler segment.  The TVS during this quarter has shown a growth of more than 9% by selling 473200 units during this quarter as compared to the same quarter of previous year. The sale from the domestic market was up by 6.75%, while the export of the company has surged by around 33% during Q4FY14 as compared to same quarter of previous year. Hero Motocorp has also seen sales growth of more than 4% on YoY basis. 

The sales of Bajaj Auto have reduced but it is lesser than the other auto companies. The total sales have reduced by more than 4.85% on YoY basis during Q4FY14. The sales from the domestic market have dropped by more than 12%, whereas the export has increased by 9% on YoY basis. 

So from the above it is clear that the industry is still under pressure but the two wheeler segment has performed well. The performance of automobile sector is influenced by the performance of the economy. As the rabi crop was damaged due to unseasonal rains and hailstorms the performance of automobile segment will be under pressure. 

As far as margins are concerned, the companies have increased the price of their vehicles, and as the excise duty has reduced by the government, the margins are expected to increase for the Q4FY14.