India’s automobile sales are projected to fall by 22-25pc in FY2021 (April 2020 to March 2021) according to the rating agency Ind-Ra. Auto sales in April were nearly zero, while May recorded minimal sales. The projections exclude tractor sales which are expected to dip by 10-12pc.
Auto sales decline would be the steepest since 2000, worse than the levels recorded during 2008 global recession, said the agency report. Industry volumes would be close to FY11-12 levels.
Monthly sales volume is unlikely to return to pre-COVID levels before mid-FY22 (post-September 2021). Industrial production activities, favourable regulatory changes, macro-economic recovery and increase in consumption levels would drive auto sales. Sales volumes could be around high-single digits or low-double digits after mid FY22.
Two-wheeler segment is projected to rebound faster, followed by passenger vehicles. The decline in medium and heavy commercial vehicles will be the steepest. Two-wheeler sales will be down by 20-22pc, passenger vehicles by 22-26pc and light commercial vehicles by 26-30pc while heavy commercial vehicles will decline by 35-45pc in FY21.
Demand for passenger vehicles is driven mostly from the metro and tier-1 cities which are still under partial lockdown and this will impact demand. The slump in economic activities in certain sectors, capex deferrals and production disruptions would result in lesser movement of vehicles. Tight liquidity and financial institutions reluctance to disburse loans to riskier portfolios would be negative for medium and heavy commercial vehicle sales. A recovery in this segment would be possible if the vehicle scrappage policy is implemented and infrastructure development work gathers pace.
India’s rural sector is likely to support two-wheelers and tractors sales. Government incentives and less exposure to lockdown will boost rural incomes and help auto sales. Tractor sales volume will witness the least decline of 10-12pc in FY21.
Lack of trained labourers, supply chain issues and liquidity challenges would continue to challenges India’s auto sector, according to Ind-Ra.