Following the news that the auto industry in India declined by 75% year-on-year in the first quarter of FY 2020-2021;
Bakar Sadik Agwan, Senior Automotive Consultant at GlobalData, a leading research and consulting company, offers his view:
“The Indian automotive industry has been hit hard by the COVID-19 pandemic. Zero sales in April, limited resumption of economic activities in May and the increasing number of new COVID-19 cases in June and July have severely affected the demand of new vehicles. The after-effect of limited economic activity during April and May has kicked-in as weak labor/jobs market and the subsequent weak consumer sentiments resulting in cautious spending. Though there has been healthy demand from rural areas, it is not sufficient to counter-balance the tragic decline that April and May have seen. The market clearly looks far from recovery.
“According to the Society of Indian Automobile Manufacturers (SIAM), the passenger vehicles sales in April-June 2020 stood at 153,734 units, which is 78.4% down from the same period previous year. All major OEMs witnessed decline in their Q1 2020-21 sales. The extension of lockdown till 31 July in several states and weak consumer sentiments over volatile market situation continue to deter customers from big ticket purchases. However, June has been a bit positive, at least for mass market vehicles. OEMs such as Maruti Suzuki and Hyundai witnessed month-on-month increase in June 2020 sales, primarily driven by small cars i.e., entry-level sedans and hatchbacks, and driven by strong demand recovery in the rural areas.
“However, when compared to 2019, Maruti Suzuki and Hyundai’s June 2020 sales declined by 54% and 49%, respectively. It indicates that the demand is approximately half compared to pre-COVID levels. With the unlock of economy in process, the coming months are expected to witness a gradual increase in month-on-month demand, but getting back to the pre-COVID volume levels will remain a ‘difficult to achieve’ target for the industry and SIAM expects a decline in range of 26-45% in the FY 2020-21.
“GlobalData expects change in Indian light vehicle market dynamics with increase in demand for small and mid-size vehicles due to consumer sentiments, which are directly linked to both COVID-19 and the economy. However, with the increasing number of COVID-19 cases and unpredictable market situation in the near-term, GlobalData forecasts new vehicle sales to fall down to 2010 levels. GlobalData’s latest light vehicle sales forecast estimates calendar year 2020 sales to reach 2.38 million units, a decline of 32.6% from the previous year.”