Slow & Steady Revival of The Automobile Industry
3 min read
There is a slow revival of the automobile industry and owing to the pandemic, the economy has slumped, giving a blow to all the sectors. The automobile industry is no exception to the rule. In June, sales numbers of Indian automakers are expected to drop 35-70% on YoY basis.
Motilal Oswal predicts a fall in CV section volumes:
- Mahindra & Mahindra: 62%
- Ashok Leyland: 82%
- Eicher Motors: 85%
Drop in PV segment as per Emkay:
- Maruti Suzuki: 62% YoY
- Mahindra & Mahindra: 65%
TVS Motor forecasts the business environment to be challenging during the current fiscal, gauging the chances of revival only during the later part of the year. The effect of economic slowdown is witnessed on TVS Motors domestic business. This is largely attributable to uncertainties like salary cuts or job loss.
Sales of two-wheelers by TVS:
- FY20: 24.1 lakh units
- FY19: 31.4 lakh units
A ray of hope comes with the recovery of economic activities. Unlocking in Delhi has been marked by an increase in vehicle registrations. The jump to 23,940 in June from 8,455 a month ago is quite impressive.
According to official data, 18,741 two-wheelers, 4,755 four-wheelers, 74 three-wheelers & 280 e-rickshaws were registered in June. Earlier, registrations of vehicles in Delhi hovered between 40,000 & 45,000. COVID-19 has caused a major turmoil. The President of All India Car Dealers Association has proposed a relief in GST to the Government. This comes about due to the financial hardships faced by the people and their demand for used cars. The global scenario is not very pleasing to the eye too. As the business globally is also running slow & growing steady as compared to what it used to be.
Tesla Inc slashed the price of its sport utility vehicle, Model Y, by $3,000. According to its website, Model Y now starts at $49,990, down from its previous price of $52,990. The price cuts also extended to Tesla’s Model 3, Model X and Model S in May. The U.S. electric carmaker seeks to maintain its sales momentum during the pandemic. Elon Musk’s company also recorded a fall in car deliveries in Q2. German passenger car major Volkswagen, also faced a blow due to COVID-19. It aims to clock 20% growth in sales this financial year.
As per recent comments from the carmakers, the industry operated at 40% of its capacity in the month of June. TVS envisions a rise in demand for vehicles, especially two-wheelers, considering consumer preferences inclining towards personal mobility bearing in mind the long-term norms of social distancing. TVS expects the steady revival of the two-wheeler industry owing to good monsoons resulting in growth in the agricultural sector. Hatchback segment has become strongest in terms of sales volumes with a cumulative figure of 25,962 units. Maruti Suzuki’s Wagon R, the highest-selling vehicle, recorded sales of 6,972 units in June’20; fall from corresponding period in the last fiscal. To boost up the sales, there are raining discounts to the tune of Rs 80,000 offered by Tata Motors on Harrier, Nexon, Tigor and Tiago.
According to Motilal Oswal Securities, demand recovery is skewed towards semi-urban & rural markets. The performance of the tractor segment has been commendable with Mahindra & Mahindra recording a rise in domestic sale of tractors of 12% & Escorts registering a growth of 22.8%. How well will the automobile industry spring back, will it pump its share in the economy slow & steady?
