Auto stocks not out of the woods yet

The recent announcements on corporate tax rate cut and GST cuts were not effective enough to boost the auto stocks. In fact, the auto stocks continue to decline as, currently, there isn’t any major initiative announced by the government, particularly for the auto sector.

Many automakers have been keeping there production facilities shut due to the mismatch of demand and supply. Recently, Maruti Suzuki announced a price reduction of select models by Rs. 5000. Additionally, the company also reduced the ex-showroom price of its Baleno RS model by Rs. 1 lakh. This step by the largest car manufacturer of the country is initiated to increase the demand for its products during the festive season, which is about to kick start from this weekend. Many automobile companies have started to give huge festive offers in an aim to clear the piled up inventories.

Besides facing challenges in the domestic market, the auto companies are also witnessing muted demand in global markets. Media reports suggest that Tata Motors is set to suspend production at its subsidiary plant of Jaguar Land Rover (JLR) located in UK for a week in November in order to adjust to the adverse market conditions, which also includes the uncertainty of the Brexit issue.

Markets will keep an eye on the sales number for the month of September. However, most auto companies are expecting to see better sales growth in the October-December quarter.

In Friday’s session, most of the auto stocks remained under selling pressure. Maruti Suzuki India closed at Rs. 6773.15, down by 1.27 per cent; Tata Motors closed at Rs. 119.9, down by 3.69 per cent; Hero MotoCorp closed at Rs. 2727.65, down by 1.18 per cent; TVS Motor Company closed at Rs. 412.4, down by 1.39 per cent on BSE. Nifty Auto index also ended lower by 1.38 per cent.