The second covid wave has stalled the auto industry’s momentum recorded in 3Q-4QFY21, according to a recent report published by India Ratings and Research (Ind-Ra). The maintenance shutdowns by original equipment manufacturers (OEMs) extending to May and April due to the closure of automotive dealerships, dampening consumer sentiments, and constraints in supply have hit the industry hard.
The sales volume of the domestic automobile’s sector, excluding commercial vehicles (CVs), declined 30% month to month in April 2021. Due to the countrywide lockdown in April 2020, the year-on-year numbers are not comparable. Two-wheeler (2W) and passenger vehicles (PV) sales declined by 34% and 10% respectively in 2021.
Tej Karan Singh, Senior Analyst, India Ratings and Research, said, “The demand for PVs stayed resilient in April 2021 and had the least decline. It benefitted from the rise in preference by customers for personal mobility. The country’s PV market continues to witness a rising move towards utility vehicles (UVs) that accounted for 42% of PV domestic sales.”
Scooter and motorcycle sales fell 33% and 34% respectively in April 2021. Since 2Ws is a price-sensitive segment, it was affected more by the increased cost of ownership due to price hikes by OEMs and high fuel prices in the country.
There was a 57% decline in three-wheeler sales (3Ws) and a further decrease in shared mobility preference. However, the growth trend continued for exports volumes by up to 19% month-on- month in April 2021. This was primary led by a 21% month to month growth in 2W exports. While the UV segment’s volume fell by 1% month to month (rising by 47% in comparison to April 2019), passenger car volumes also fell by 10% month to month and by 12% from April 2019.
There was a 21% month to month decrease in the total production, excluding CVs, led by a 23% and 11% fall in the production levels of 2Ws and PVs respectively in April 2021. The production of 3W was at 86% of the previous month’s level, amid a decreased demand in domestic markets.
At the dealership levels of PVs, the inventory increased to 15-17 days from March 2021’s 10-15 days. Ind-Ra expects that the rise is because of OEMs replenishing inventory with dealerships in view of the supply chain issues witnessed in 4QFY21 coupled with the lockdown induced shutdown of dealerships. The 2W dealerships’ inventory stayed steady at 30-35 at end-April 2021.
According to Ind-Ra, the expectations of a strong macroeconomic growth 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.
Source: India Ratings and Research
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