Analysts cautious on auto stocks amid uneven recovery

 Passenger vehicle OEMs' attempt to catch up to the demand was impacted by production cuts, while demand for two-wheelers and PVs remain weak. Find out if you should chase the rally in auto stocks

In December 2021, the dispatches to auto dealers continued to remain a mixed bag. While wholesale volumes for passenger vehicle, two-wheelers, and tractor segments declined on a yearly basis, the commercial vehicle segment continued its clock a gradual recovery.
As per the latest monthly sales figures, Maruti Suzuki’s total volumes declined by 4% YoY last month, led by a 13% decline in domestic passenger vehicle volumes.
M&M’s domestic PV volumes increased by 10% YoY while Tata Motors’ domestic volumes rose 51%.
Among the non-listed players, Hyundai Motors reported a 32% yearly decline in domestic volumes; MG Motors reported a 36% fall whereas Kia Motors reported a 34% volume decline. Renault-Nissan and Honda, too, reported 8-17% YoY decline in volumes.
As regards two-wheelers, Hero Moto’s total volumes declined by 12% YoY; TVS Motors’ total sales fell by around 8%; and Bajaj Auto’s total two-wheeler sales dipped by 6%.

Royal Enfield’s total volumes, however, increased by 7%.
On the bourses, shares of auto and auto-ancillary companies entered fast-lane yesterday with individual stocks rallying up to 8% intra-day.
So, should you add these stocks in your portfolio? On dips, suggest analysts.
The sector, especially two-wheeler makers, is not entirely out of the woods yet. Apart from consistent price hikes and rising fuel costs, potential third wave due to the Omicron variant, could limit consumer spending, cautions Ashwin Patil, Senior Research Analyst, LKP Securities.