| WABCO-TVS , with ~80% market share in air brake actuation system for commercial vehicle industry in India is a major beneficiary for growth in CV segment. The company also caters to export markets and receive technological assistance from parent company Wabco Holdings (USA). India has emerged as one of the favorite destinations of global auto majors considering its huge demand growth potential driven by substantially low penetration. Players such as Volkswagen, Toyota, Honda, Skoda, Ford, etc are entering into the small car market with new launches to capture a share in the growing segment. New launches are expected during next two to three years from global auto majors which provides opportunity to Indian auto component players to enter into new contracts and tie-ups. Also considerable difference between duties on small cars and larger cars has boosted manufacturing of compact cars in India. Pick-Up In Industrial Demand Will Aid CV Growth The CV segment has recovered rapidly from its cyclical downturn (in FY 2009, when sales dropped 22%), led by pick-up in industrial recovery as well as Government's stimulus measures. Within commercial vehicles, the LCV segment has performed better than MHCV segment mainly due to the success of Tata Ace (65% market share). Going forward, we believe recovery in the overall economy and pick up industrial demand will drive CV sales. A Small Car Hub Hyundai Motors India Ltd has already made India as its global base for manufacturing small passenger cars. Similarly, Maruti has also launched the A-Star a small passenger car, which is exported to global markets with India as the manufacturing hub. The increasing domestic demand and export of cars would drive growth of the auto components sector. Rural Demand To Continue Going Forward The rural market proved to be a key source of sustained automotive demand during the economic slowdown. During slowdown in FY09, demand for two wheelers and Passenger vehicles was not much impacted due to strong growth in rural sales. Cash purchases were driving the demand for two-wheelers, passenger vehicles and tractors, even as credit became scarce in the wake of the liquidity crisis. Rural sales have been driven by higher MSP and employment generation scheme like NREGA. These initiatives are likely to continue, hence we believe, the strong demand from rural segment will continue during medium to long term. Resilient Urban Sales - Finance Availability Continues To Improve Substantial portion of PV and UV sales in urban areas are financed. During FY09, with sharp increase in delinquencies from the segment, banks restricted lending to the sector. However, with economic recovery, banks have actively increased their exposure to the sector. This has resulted in a sharp turnaround in volumes from urban areas. In fact, contribution of financed sales for Maruti Suzuki (market leader in PV) has surged from ~50% during FY09 to about ~70% currently. We believe, finance availability will continue to drive volumes in urban areas.
Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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