Strong farming income, especially in northern India, and the ongoing wedding season boosted “two-wheeler” (motorcycles, scooters) sales. Hero Honda was the key beneficiary – sales volumes in February were up 24% y-o-y. We expect sales to be aided by elections, which will be held during April-May. However, the outlook remains bleak on exports; Bajaj Auto saw its exports decline 20% y-o-y.
Car makers also benefited from implementation of the Sixth Pay Commission recommendations in October 2008. Maruti Suzuki was the key gainer; the central government employees’ contribution doubled to 15% of its sales in January 2009. However, as the initial euphoria fades, maintaining growth will be difficult, we believe, especially as macro factors remain uncertain.
Truck sales were hit by the non-availability of cargo. Medium and heavy truck sales fell 48% at Tata Motors. We may see marginal recovery in truck sales in March, as some operators may buy trucks to claim benefits from the accelerated depreciation scheme.