Automatic transmission cars expected to account for 40% of Indian car industry by 2023
Worsening road congestion, improving technology and rising fuel efficiency are leading the Indian car buyers to shift to the clutch-less convenience of automatic cars.
Why is this important
- Two-pedal cars and SUVs market has almost doubled in the last two years and accounted for ~10-12% of the overall passenger vehicle (PV) market in FY2018. The market is estimated to cross half a million by the end of 2019.
- Three years ago, the share of automatics PVs in India was less than 5% and has the potential to account for ~40% of the total market in the coming five years.
- The ride-hailing companies, Uber and Ola have created a scarcity of drivers in major metro cities. This has led the vehicle owners to choose automatic PVs as they are easy to manouver in the city traffic.
Stocks to be impacted
- For Hyundai, Honda, Toyota and Maruti, ~18-20%, 30% and 8.5% of the sales come from automatic versions respectively.
- For the homegrown players, Tata Motors and Mahindra & Mahindra, the share is 10-15% of the models where an automatic option is available. Tata Motors has come out with AMT in all its models and this augers well for the company.
The automatic car segment has seen the price premium over manual cars come down to as low as Rs 40,000 and this will help drive the growth in the Indian PV automobile segment.
Tata Motors (CMP Rs. 277, M Cap Rs. 80,080 crores, FY20E PE 7)
Maruti Suzuki (CMP Rs. 8940, M Cap Rs. 2,70,059 crores, FY20E PE 22.9)
Mahindra & Mahindra (CMP Rs. 898, M Cap Rs. 1,11,675 crores, FY20E PE 19.6)