The second Covid wave could pose a downside risk to domestic auto demand: India Ratings

India Ratings and Research (Ind-Ra)  in its report on Friday stated that the second wave of COVID-19 could put the domestic auto industry’s demand at risk. Demand for commercial vehicles (CVs) may pick up again in the second quarter of 2021-22 as economic activity improves, and due to lower capacity in the system, following consecutive double-digit declines in 2019-20 and 2020-21.

Demand for CVs, particularly medium and heavy CVs, is likely to also benefit from various government initiatives to help revive the economy. However, the revival of the passenger carrier segment is still some time away, it said. The domestic automobile industry's sales volume declined 14 percent year-on-year (YoY) in the last fiscal year with passenger and commercial vehicle segments sale falling 2 percent and 21 percent respectively, while the two-wheelers volume fell 13 percent (YoY).

The decline in sales volume is in line with Ind-Ra's estimate of 14 -18 percent decline for the year, it said. For 2020-21, the total retail sales volume fell 34 percent YoY led by 17 percent drop in passenger vehicle (PV) sales, 51 percent fall in CV sales and 34 percent drop in two-wheeler (2W) retail registrations, respectively, IndRa said. Amid lower discretionary purchases by consumers, PVs remained the saving grace for the domestic retail market, it said. However, retail PV sales volumes grew 28 percent in March 2021 over the year-ago period while other segments such as CVs, 3Ws, and 2Ws tell a rather grim story as retail sales declined 42 percent, 51 percent and 35 percent YoY , respectively last month, said the report.

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