Market Movers
This is not amongst the largest sector in the Index (~3% weight), and is affected by news flow.
1. Monthly numbers: Vehicle sales numbers are declared on 1st of every month
2. Interest Rates: Lower interest rates mean higher sales for the industry - as loans would be cheaper
3. Capacity Addition/Suspension: Affects the supply and competition in the industry
4. Economy: Related to economic growth as well, over the medium term
Reading the Statements
1. Auto-stocks are most sensitive to EBITDA margins (as volumes are known beforehand).
2. Primary costs are Raw Material expenses - 70-75% of net sales
Long Term Concerns/Factors
1. GDP Growth
2. Loan Growth - and interest rates
3. Tax Cuts - Income tax cuts would boost auto sales
4. Demographic - long term growth potential
Industry Structure
1. Two wheelers is highly consolidated industry with top 3 players (Hero Honda, Bajaj, and TVS) accounting for 80% market share.
2. Cars are also very much a consolidated markets, but there is a threat of increased competition going forward.
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