Car, Bike, Auto Industry in India may be pushed back by 10 years

Car park inside Hyundai India Chenna Plant. File Photo.

The Indian auto industry is facing one of its worst slowdowns over the past several months and the novel coronavirus outbreak has added to the woes. It may be noted that the domestic volumes declined 17-18 percent in FY20 both where passenger vehicles and two wheelers are concerned while trucks saw a whopping 47 percent decline, the highest fall in around 4 decades.

An overall economic slowdown, low buyer sentiments and the upgrade from BS4 to BS6 all impacted sales to a great extent. The next financial year is also not expected to be any better. In fact, it could be worse if forecasts by leading auto analysts are anything to go by.

Forecasts by Crisil Rating, ICRA Ratings, IHS Markit and Jato Dynamics have shown that all segments in the country’s passenger vehicle segment will see a decline of 10-15 percent in 2020-21. The novel coronavirus impact will set the Indian auto industry back by a decade. The segment moved from slowdown to lockdown after the Government of India announced a 21 day lockdown in a bid to help contain the virus.

Maruti car plant

Maruti Suzuki, Mahindra & Mahindra, Ford Motor Co, Toyota Motor Corp and Hyundai Motor Co have all suspended manufacturing along with every other automaker in the country. The possible extension of this lockdown also dashes hopes for any revival in production activity in the weeks ahead.

Taking only the passenger vehicle industry into account, volumes shrunk from 3.4 million units in FY19 to 2.4 million units while two wheeler sales could dip from 21 million units to 15.5-16 million units at the end of FY21 putting it back between 3-10 years while two wheeler and commercial vehicle levels could plummet to sales levels of FY15 and FY11 respectively. The first quarter of FY21 could be impacted not only by low demand but also by low supplies, a large percentage of which comes in from global markets.

When taking urban and rural demand into account, it is rural demand that could be better especially where two wheeler sales are concerned due to better rabi forecasts. Even after the lockdown is lifted, there will be a sense of fear in the minds of buyers which would relate to auto volumes dipping by 35-45 percent in Q1FY21 and it is the first quarter volumes that account for 23-26 percent of total volumes for automakers.

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