Second wave of COVID-19 may pose risks to domestic auto demand, says IndRa
The second wave of COVID-19 could pose downside risks to domestic auto industry demand in the near term, according to a report on Friday.
The demand for commercial vehicles (CVs) could pick up in the second quarter of 2021-2022 as economic activities improve, and also due to the decline in system capacity after a consecutive double-digit decline in 2019-20 and 2020-2021, India Ratings and Research (Ind-Ra) said in the report.
Demand for CVs, especially medium and heavy CVs, is also likely to benefit from various government initiatives to help jumpstart the economy. However, the renaissance of the passenger carrier segment is still a long way off, he said.
The domestic auto industry’s sales volume declined 14 percent year-over-year (year-over-year) in the last fiscal year, as sales in the passenger vehicle and commercial vehicle segments fell by 2 percent and 21 percent respectively, while the volume of two-wheelers fell 13 percent. (YoY). The decline in sales volume is in line with Ind-Ra’s estimate of a 14-18% drop for the year, he said.
For 2020-2021, total retail sales volume fell 34% year-on-year, led by a 17% drop in passenger vehicle (PV) sales, a 51% drop in CV sales and a decline of 34% of retail two-wheeler (2W) registrations, respectively, said Ind-Ra. Amid the decline in discretionary consumer buying, PV remained the saving grace for the domestic retail market, he said.
However, PV retail volumes increased by 28% in March 2021 from the previous year, while other segments such as CVs, 3Ws and 2Ws tell a rather bleak story as the Retail sales were down 42%, 51% and 35% year-over-year. respectively last month, the report said.
The double-digit drop in retail sales in all segments except PV in March 2021 indicates that consumer sentiment has not fully recovered, he said, adding that Ind- Ra believes the second wave of COVID-19 could pose downside risks to the domestic automobile. short-term industry demand.
According to the report, the domestic auto industry recorded positive growth for the eighth consecutive month in March 2021. PV and 2W sales volumes increased 115% and 73% year-on-year, respectively in March 2021, mainly thanks to the weak base of March 2020.
Export volumes also continued the growth trend in March 2021, up 57% from March 2020, boosted by 63% year-on-year growth in 2W exports. For 2020-2021, total export volume decreased 13% year-on-year, with PV, CV and 2W export volume falling 39%, 17% and 7% year-on-year, respectively, Ind-Ra said. .
The PV segment benefited the most from the preference for personal mobility, resulting in the smallest decline among the segments; also lower than Ind-Ra’s expectation of a 5-8% drop for 2020-2021.
Segments such as compact / super compact and mini / micro performed better than the mid-size / executive / high-end car and van segments, possibly due to higher demand from customers. first-time buyers, he said. In addition, the demand for commercial vehicles continues unabated, with the segment increasing 12% year-on-year in 2020-2021 thanks to new launches, the report says.
While the 2W segment has benefited from healthy rural demand, factors such as delays in opening educational institutions, rising cost of ownership due to rising prices and rising costs. Fuel prices, coupled with lost revenue from the COVID-related lockdown, have driven demand. contraction, especially in entry-level models.
The 2W drop in volumes was in line with Ind-Ra’s expectations of 13-16% in 2020-2021, he said. CV demand saw much-needed traction in the March 2021 quarter, supported by a pickup in construction demand. The domestic CV wholesale volume grew 43% year-on-year in the quarter, driven by 101% year-on-year sales growth from medium and heavy freight carriers, Ind-Ra said.
Light freight carriers’ sales volumes increased 42 percent year-on-year, according to the report. However, passenger carriers’ CV sales volumes fell 55% year-on-year in the March quarter as consumers continued to avoid public transport.
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