Are the growth wheels coming off in the cars segment?
Tata Motors 36 times. If demand fails to match expectations, earnings growth could suffer, and so could their stocks. Another second-order impact of weak demand could be on vehicle loans.
According to data from the central bank, in the three-year period to June 2024, vehicle loans to individuals (for both four-wheelers and two-wheelers) that are outstanding with banks have grown at a compounded annual rate of 18%. Weaknesses on the demand side could not only slow down future growth, but also strain the current portfolio. In the three months from May to July 2024, while overall growth for four-wheelers has been muted, states have shown a wide variance.
There are 14 states and Union territories where registrations fell on a year-on-year basis. This includes significant markets like Tamil Nadu, Karnataka, Gujarat and Delhi. The two biggest markets by registrations—Maharashtra and Uttar Pradesh—grew just 1.6% and 1.9%, respectively.
At the other end of the spectrum, there are 10 states and UTs that grew above 10% during this period, led by Punjab and Haryana. While growth in the four-wheeler segment is plateauing, the two-wheeler segment appears to be in better shape. In 2024 till July, while registrations in the four-wheeler segment grew 7.8%, the two-wheeler segment grew 17.5%.
While the industry registered fewer cars in two of those seven months on a year-on-year basis, that has not been the case for two-wheelers, which has grown each month. However, year-on-year growth shows a wide variance among the major two-wheeler manufacturers in the latest three months (May to July 2024). While registrations of Honda two-wheelers have grown 32%, those of TVS Motor have grown 9%.
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