Lockdown might increase woes of auto component industry as annual running of vehicles decline

Based on the analysis of 75 mega districts in the country, Crisil Research expects the annual running of vehicles to decline. Three-wheelers are likely to see the highest decline while passenger vehicles and tractors are expected to see the lowest decline of 4% during the fiscal.

By:Published: July 10, 2020 9:16 AM
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The economic crisis brought on by the extended lockdown to contain the Covid-19 pandemic is expected to add to the woes of the auto component industry (including tyres, engine oil and lubricants) this fiscal, which has already been battling a steep slowdown in demand from both OEMs and export markets, a report said on Thursday. Based on the analysis of 75 mega districts in the country, which account for 43% of the segment’s total revenue, Crisil Research expects the annual running of vehicles (in km) to decline, with three-wheelers likely to see the highest decline of 22% and passenger vehicles and tractors seeing the lowest decline of 4% during the fiscal. These districts together account for a significant chunk of automobile sales by OEMs and 46% of total number of automobiles in the country, it said.

Crisil arrived at the overall impact of Covid-19 on revenue this fiscal, the likely impact at a granular level, taking into account annual running of a vehicle, and replacement cycle of lubricants, engine oil, tyres and spare parts, besides customer behaviour and attitudes towards replacement of parts, and commuting trends.  “We have bucketed the districts on susceptibility, factoring the spread, risk and intensity of Covid-19 as on June 25. Of the 75 districts, 50 are ‘high susceptibility’ areas, 23 ‘medium susceptibility’, and the remaining two ‘low susceptibility areas’.

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