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Automotive Product Finder Magazine | Coronavirus scare deepens domestic auto industry woes: Ind-Ra
Coronavirus scare deepens domestic auto industry woes: Ind-Ra
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According to India Ratings and Research (Ind-Ra), domestic automobile sales volume fell 19 per cent YoY (Year on Year) in February 2020, on lower consumer sentiments as original equipment manufacturers (OEM) continued the regulated wholesale billing to grapple with the effects of switching to Bharat Stage (BS) VI vehicles amid a low demand. Passenger vehicle (PV), commercial vehicle (CV) and two-wheeler (2W) sales fell 8 per cent, 33 per cent and 20 per cent YoY, respectively, in February 2020. “Retail registrations grew on a YoY basis in February 2020, on increased transitionary demand for BS IV vehicles with overall registrations up 3 per cent YoY. PV retail registration fell 1 per cent YoY, while CV and 2W retail registration grew 13 per cent and 2 per cent YoY, respectively,” said Santosh Pudasaini, Analyst, India Ratings and Research Pvt Ltd.
Existing inventory at the dealership level led to most OEMs continuing to implement production cuts in February 2020. Over April 2019-February 2020, the auto industry undertook an overall production cut of 13 per cent YoY; this translates to around 13 per cent, 27 per cent and 13 per cent YoY production cuts in PV, CV and 2W segments, respectively. The regulated wholesale billing by OEMs led to the inventory for PVs decreasing to 10-12 days in February 2020 from 15-20 days in January 2020. Similarly, the average inventory for CVs decreased to 10-15 days in February 2020 from 25-30 days in January 2020, on lower wholesale billings coupled with increased retail registrations. However, the average inventory for 2W remained alarmingly high at 20-25 days in February 2020 from 25-30 days in January 2020, which makes it highly unlikely for the dealers to be able to liquidate all the BS IV vehicles, before the registration deadline of 31 March 2020, after which only BS VI vehicles can be sold.
“Amid the nation-wide lockdown on the coronavirus scare, some dealers with BS IV stock, especially 2W dealers, would be unable to liquidate the compliant vehicles before 31 March 31, 2020 deadline. A combination of an extended shutdown followed by a weak demand in the next two to three months, as collective measures are being taken to overcome COVID 19, is likely to intensify the woes of the automotive industry which is already struggling with tepid demand over the previous 12 months,” said Santosh Pudasaini.
BS IV Vehicles
India Ratings And Research
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