With the pandemic making inroads into rural India, the auto industry is staring at difficult times albeit the forecast of a good monsoon could bring good tidings.
11 May 2021 | 4507 Views | By Mayank Dhingra
Vehicle showrooms continue to remain shut in most key markets over the past three weeks with a host of states reeling under the Covid resurgence.
At 209,000 units, passenger vehicle sales last month were down 25.33 percent on a month-on-month basis (March 2021: 280,000 units) according to data released ...
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Vehicle showrooms continue to remain shut in most key markets over the past three weeks with a host of states reeling under the Covid resurgence.
At 209,000 units, passenger vehicle sales last month were down 25.33 percent on a month-on-month basis (March 2021: 280,000 units) according to data released by the Federation of Automobile Dealers Associations (FADA) on Monday. Since April 2020 was a washout because of the national lockdown, a year-on-year comparison is pointless.
“Sentiment is a little poorer compared to last year as every second family has been affected by Covid. When people start to move around, there will be a fillip in passenger vehicle sales,” says FADA president, Vinkesh Gulati,
The good news for automakers is that there have been no cancellations of bookings and there is already a waiting period of two to six months for popular models, thanks to the demand-supply mismatch. Moreover, he says, digital interactions with prospective customers have allowed dealers to create a data pool which can be leveraged once things resume. New launches will also do their bit to revive sentiment.
For now, it is clear that the recovery process could take time as the operational infrastructure will need to start functioning again. “Retailing is not a single man’s job; we will need to open up everything. It won’t happen if finance companies, RTOs or service centres are not fully functional. Having said that, in the passenger vehicle segment, I doubt there will be any issue regarding customers not buying vehicles,” says Gulati.
Tepid 2W sales to continue, wedding season notwithstanding
The same, however, does not hold true for two-wheelers. FADA is “still cautious” on this segment and is not unduly optimistic about the segment recovering quickly enough. Registration numbers for April show a 28 percent MoM fall in two-wheelers to 865,000 units from 1. 19 million units in March 2021.
While sales have doubtless suffered due to the closure of schools and colleges for over a year now, the distress in rural India with Covid spreading there has made things worse. “Almost 20 percent of the rural population has been infected and this has had its fallout in sales of entry-level cars and commuter motorcycles,” adds Gulati.
April and May are traditionally good months for two-wheeler retail, mainly because of the wedding season in Uttar Pradesh, Bihar and Rajasthan but with dealerships closed, it has been a huge setback.
Tractor demand likely to bounce back
The tractor segment, which did very well and proved the exception to the rule last year, saw April sales numbers crash by 45 percent to 38,285 units (March 2021: 69,082 units). “Tractor sales averaged 50,000 to 60,000 units every month last fiscal. Once the rural Covid impact subsides in a month or so, I am expecting a good turnaround to happen though not to the extent as last year,” remarks Gulati.
CVs to continue taking a hit till end-2021
The FADA chief though is not so hopeful about commercial vehicles which saw a 24 percent MoM fall to 51,436 units from 67,372 units in March 2021. “Covid has disrupted the CV segment again. This problem will continue with industrial activity, infrastructure and freight movement down. CV sales are not expected to improve for the next six months at least,” he cautions.
The good news for the CV sector is that the growing demand for oxygen supplies across the country has spurred demand for medium and heavy commercial trucks, which has in turn put pressure on coach builders and cryogenic tank suppliers. There is also some activity seen in small CVs which also transport oxygen cylinders.
The other positive for the auto industry is the forecast of a good monsoon. “Just like last year, the rural rebound is expected to be faster and better. A good monsoon improves sentiment with farmers’ expectations of a good crop and earnings. While the actual impact of the rains will be felt during July-September, things could start looking up from June,” says Galati.