Demand restoration for cars continues in third quarter: Report

MUMBAI: The demand restoration for cars continued within the December quarter, with robust momentum witnessed in retail gross sales of tractors and passengers automobiles, in line with a report. According to the report by brokerage Motilal Oswal Financial Services, the restoration in gross sales has been stronger than anticipated throughout segments, excluding the three-wheelers, pushed by pent-up demand, constructive agri-economics and a shift to personal from public transport.

On a wholesale foundation, the report estimates tractor volumes to develop by 22 per cent year-on-year, passenger car phase demand to rise 15 per cent, and two-wheelers 19 per cent on a low base of final 12 months, it mentioned.

Among the business car phase, the sunshine business car demand is estimated to develop 1.5 per cent, whereas the decline is getting smaller for medium and heavy business car (M&HCVs) with an estimated eight per cent drop throughout the third quarter, as per the report.

Three-wheelers are witnessing a quarter-on-quarter restoration in volumes.

“However, we do see near-term uncertainties on account of factors such as supply-side disruption due to a global shortage of semi-conductors, sharp commodity cost inflation led price increases, as well as risk to demand (from a price hike, fading benefit of COVID-19 to private transport, among others),” the report mentioned.

The brokerage agency additionally mentioned it expects the amount restoration in all segments to maintain in FY22, with core demand rising 5-7 per cent for two-wheelers/passenger automobiles/tractors, supported by the advantage of the low base of April-August 2020.

For the three-wheelers and business automobiles, a pointy restoration is anticipated in FY22.

“We expect the recovery in EBITDA margins to continue for the second straight quarter despite the initial impact of commodity cost inflation,” it mentioned.