Low base of FY21 & good monsoon will help recovery in auto sales: India Ratings
Premium- The second wave’s severe impact across rural and urban regions is likely to have an adverse impact on demand
Low base of FY 21 due to the outbreak of Covid-19 pandemic, forecast of a good monsoon and a decent harvesting of Rabi crop might help in the recovery of automobile sales in the country once the second wave of Covid-19 abates. Sales of passenger vehicles, two-wheelers and commercial vehicles are expected to show some signs of a pick-up in the second half after sharp decline in the first six months due to the lockdown.
“The second wave’s severe impact across rural and urban regions is likely to have an adverse impact on demand. However, the expectations of strong macroeconomic growth expectations albeit on a lower base in FY21 along with an average monsoon from Indian Metrological Department and a good Rabi harvest may assist demand for the sector in FY22," said analysts of India Ratings, a credit rating firm.
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They further added that Ind-Ra believes that the second covid wave has interrupted the momentum recorded by the industry in third and fourth quarter of FY21, with many original equipment manufacturers (OEMs) advancing maintenance shutdowns to April and May on account of dampening consumer sentiments, closure of automotive dealerships, as well as supply-side constraints.
Manufacturing of automobiles came under pressure from the first week of April when the state government of Maharashtra announced lockdown measures to contain the rising cases of Covid infections. Subsequently other states like Delhi, Haryana, Karnataka, Tamil Nadu and others also followed suit.
Leading automobile manufacturers like Maruti Suzuki India Ltd, Hero MotoCorp Ltd, Hyundai Motor India Ltd and others have either stopped production at their factories or reduced output significantly. Some manufacturers like Tata Motors and Bajaj Auto Ltd have been continuing with production albeit with limited capacity.
“Passenger vehicles and two-wheeler sales volumes declined by 10% and 34% m-o-m, respectively, in April 2021. Three-wheeler sales volumes declined by 57% amid a further reduction in preference for shared mobility. Nevertheless, exports volumes continued the growth trend in April 2021, up 19% m-o-m, mainly led by 21% mom growth in two-wheeler exports.," the note mentioned.
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