Q4FY2009 Auto earnings preview

The sales volume for the automobile companies picked up well in Q4FY2009, showing some respite after the sluggish third quarter. During the fourth quarter, the automobile companies beat street expectation in terms of volume gains, particularly in the passenger car and two-wheeler segments. Traditionally, the fourth quarter is the best as sales pick up in this period driven by the year-end demand. The fourth quarter of FY2009 was no different, as automakers reported a strong sequential growth despite the slowdown and macroeconomic woes. The sales were mainly driven by the positive impact of the implementation of the Sixth Pay Commission’s recommendations (the automobile sector is considered the biggest beneficiary of the hike in the salary of government employees); the attractive discounts being offered by the automakers; and the continued strong rural demand despite deceleration in agricultural growth in the previous quarter. Moreover, major public sector banks also contributed to the growth by easing finance availability and lending at lower rates. The announcement of various stimulus packages by the government also provided some remedy for the automobile sector especially the commercial vehicle (CV) segment that has been hit hard by the slowing demand.