Automobile sales may fall 20-25 pc this fiscal: Ind-Ra

Rating agency Ind-Ra expects automobile sales to decline by 20-25 per cent this fiscal against its earlier forecast of 22-25 per cent on account of increasing preference for personal mobility and an expected demand rebound from rural and semi-urban markets.

  At the same time, the rating agency has maintained a negative outlook for the auto sector for the second half of the fiscal, owing to continued weak consumer sentiments and macroeconomic headwinds amid the disruptions caused by the pandemic, Ind-Ra said in a release.

       The latest forecast is marginally better than the earlier forecast of 22-25 per cent Y-o-Y decline in sales volume in FY2021, released in June this year, Ind-Ra said.

 Favourable regulatory changes such as GST cuts or incentive-based scrappage policy could help demand revival in the medium-term, the ratings agency said.

 It, however, warned that any significant spread of the virus to rural India could affect the recovery trend due to further disruptions in those parts of the economy. 

 Both passenger vehicles (PVs) and two-wheelers (TWs) sales could fall 18-21 per cent y-o-y in this fiscal while the decline in the commercial vehicles (CVs) sales would be 30-35 per cent y-o-y in FY2021, on account of lower economic activities, it said.

 Ind-Ra further expects auto volumes could post double-digit growth (in mid-teens) in FY22 primarily due to a lower base over FY20-FY21.

 According to the ratings agency, lower affordability due to job losses/ loss of income would shift consumers’ preference towards lower-end vehicles, especially PVs.

 In 2Ws, motorcycles will continue to outperform scooters as the former derives substantial demand from rural markets, it said adding CVs and more specifically medium and heavy CVs would continu to see a muted demand due to lower industrial production and excess capacity in the system, and any demand revival, therefore, is unlikely before the fourth quarter of 2021-22.         Light commercial vehicles are likely to benefit from increased e-commerce, and last mile transportation particularly for essential commodities, it said in the release.

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