Fabulous February for auto sales. Which segment is better placed: CVs or PVs?

Automobile sales in February were good for almost all sub-segments and companies, but the performance of Tata group companies stood out. Domestic sales of Tata Motors’ commercial vehicles (CV) grew 32.8% year-on-year to 40,893 vehicles, whereas rival Ashok Leyland Ltd’s growth was 28% to 20,314 units.The robust data vindicates statements from CV makers that replacement cycle demand is kicking in. The average fleet age needing a replacement is now 9-10 years versus 7-7.5 years before covid.

A stable freight rate has complemented replacement demand. Nomura Research shows that the Truck Freight Index was up 8% year-on-year in February, though it was flat versus January.While strong CV numbers reflect industrial demand, buoyancy in consumer sentiment was also seen in passenger vehicle (PV) sales. Here again, Tata Motors posted the best growth.

Its domestic PV sales grew 34% year-on-year to 62,329 vehicles, perhaps aided by the launch of the New Sierra, an ICE (internal combustion engine) SUV with premium features. Nomura estimates 10,000 per month volumes for the Sierra. The vehicle’s popularity has prompted Tata to launch an electric version of the brand over the next six months.Most other auto companies did well, with the notable exception being Maruti Suzuki India Ltd, with domestic PV sales flattish at 161,000.

The small car (mini plus compact) segment declined by 8% year-on-year to 76,624 units even as utility vehicles rose 12% to 72,756 units. Small car sales had declined in January, too, down by 10%.It should be noted that the segment had increased by 25% in the December quarter. So, this could be a sign that the initial euphoria from the goods and services tax cuts on small cars has waned.