Autos to log double-digit volume decline: ICRA

The Indian automobile sector is expected to log double-digit decline in volumes in the current year across all vehicle segments, except tractors, with good recovery expected only in FY22, as per rating agency ICRA.

“The volumes in the automotive industry have been pushed back by almost over 10 years,” said ICRA.

“The FY21 volumes are expected to be down for light commercial vehicles (LCVs) by 17-20%, medium and heavy commercial vehicles (MHCVs) by 35-40%, passenger vehicles (PVs) by 22-25% and two-wheelers by 16-18%. The auto component industry (including tyres), whose prospects are tied to the automotive sector, is estimated to contract by 14% to 18% in FY21.”

For PV segment it said since the fortunes are tied with GDP growth rates and overall consumer sentiments, which are currently at historic lows, it is expected to witness “strong double-digit growth (>15%)” only in FY2022 after decline of 17.9% in FY2020 and 22%-25% in FY2021.

“The GDP is expected to decline by 11% in FY2021; this will trickle down into lower demand for the automotive industry in general (except tractors),” it said.

The fall in demand, it added, is also reflected in capacity utilisation which is likely to dip below 45% in FY2021, from 50-55% in FY2020. “We expect capex cut by 35-40% during FY2021-FY2022, and incremental investments will be primarily towards new product development and platform improvisation.”

“The rural market will be the key driver of volume in FY21 which will benefit entry level cars and UV. Buyers may opt for 2W or used cars to avoid public transport…The luxury car segment will witness a decline of over 40% in the current financial year,” said Ashish Modani, V-P,, ICRA.

On the Commercial Vehicle (CV) segment, ICRA said while retail sales are reviving, it remains a far cry from pre-Covid levels. As against a monthly sales of over 80,000 units reported prior to the pandemic, CV retail sales trended at less than 40,000 units in September 2020, even after four months of sequential improvement.

“As for the outlook, the M&HCVs and Buses segment…will grow by 40-45% in FY2022, while LCVs will… grow by 15-20%…Given current liquidity constraints and bleak demand, OEMs are curtailing capex spends; from Rs 67 bn in FY2020, it is expected to fall significantly to Rs 24 bn in FY2021 and 21% in FY2022.

As far as tractors are concerned, ICRA revised the earlier growth forecast of 2-4% to 7-9% in FY2021. It said that while uncertainty continues to exist in relation to pandemic, farm sentiments are expected to remain healthy aided by government focus on procurement, healthy monsoon precipitation and a resulting favourable kharif crop outlook.

Hot Topics

Indian Covid Variant Found In 44 Countries: WHO

<!-- -->The WHO said it had received "reports of detections from five additional countries".Geneva, Switzerland: The World Health Organization said Wednesday that a variant...

KFintech acquires stake in insurtech startup Artivatic

KFin will contribute to Artivatic with access to clientele, geographic expansion, thought leadership and technology and process frameworks. KFin Technologies, which is backed by American...

Related Articles