Automobiles Report

Quarterly update and outlook from global OEMs

Improving performance of global OEMs in 3QCY22: Gradually easing supply challenges

resulted into sequential improvement in wholesales for global OEMs in 3QCY22.

Automakers also reported sequential improvement in margins driven by better pricing and

mix. Automakers exposed to European market were impacted adversely on account of

high energy/labour inflation, recession fears, etc. Demand in Europe has seen some

moderation. However, overall order book across global players continues to stay healthy.

For instance, Renault’s order backlog stood at 3.5months (vs. 4 months at 2Q end). In 2W

space, OEMs highlighted that volume for premium motorcycles were impacted due to

production constraints. In the OHV segment, while demand moderated in EU, it continues

to remain robust in US driven by higher crop prices, higher avg. age of fleets and strong

order backlog in construction equipment vehicles led by US Infra bill.

Semiconductor shortage continues; OEMs reduced volume guidance CY22: While global

OEM wholesales improved QoQ during 3QCY22, it continued to remain impacted by a)

semiconductor supply shortage, b) localised restrictions in China, c) logistic issues.

Automakers worldwide have been reporting shrinking inventories triggered by chip

shortages. Lower inventories across major OEMs have led to record pricing for both new

and used vehicles. For instance, VW reduced its volume outlook for CY22 owing to supply

challenges and China lockdown but maintained its revenue outlook owing to higher

pricing and better mix. Toyota, too, reduced its volume outlook for FY23 by 500k units

owing to supply constraints. OHV demand continues to remain healthy supported by

higher grain prices, low inventory and strong order book. OEMs expect to improve

production by easing supplies. Going-forward, major OEMs remain confident on

continued improvement in chip supplies and logistics during 4QCY22 onwards.

Commodity / energy inflation eases; price hikes/cost pass-through supports margins: Just

like the Indian auto OEMs, global players witnessed flattish/improvement in margins QoQ

during 3QCY22. Global players are mitigating the impact through price hikes/cost pass-
through and better product mix. Global Auto Ancillary/Tyre companies reported

improvement in margin during 3Q supported by cost pass-through and easing rubber

prices. With the recent softening in commodity prices and energy inflation (from peak),

global players remain confident on achieving high-single digit/double-digit operating

margins for CY22 (maintained outlook).