Home News Second Covid wave adversely impacts auto industry in April 2021: Ind-Ra

Second Covid wave adversely impacts auto industry in April 2021: Ind-Ra

Second Covid wave adversely impacts auto industry in April 2021: Ind-Ra

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

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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