Last year, the rise in vehicle sales due to pent-up demand after the first lockdown brought much cheer to the auto sector, but this year after the second wave there may not be a similar pent-up demand. Saket Mehra, Partner, Grant Thornton Bharat, told FE that last year there was revenge shopping by consumers in retail, white goods and vehicles. “Auto demand rose by 10-15% during the 2020 festive season, with 40% of the demand coming from rural areas. This year, too, the demand will rise till the festive season, but rural may not contribute significantly due to increased healthcare spend during the second wave. Further, a modest increase by 1-7% in benchmark prices of certain Kharif crops may also not encourage some parts of rural India for discretionary purchases,” he said.
As far as passenger vehicles are concerned, while these registered 2.4% de-growth last year dominated by decline in volumes of passenger cars and vans, there was an increase in volumes of utility vehicles (UV). “New model launches within the UV sub-segment and increased vaccination will drive PV sales; it will register a carry forward of the Q4 performance of FY21 from Q2 of FY22,” Mehra said.
Overall, he added there will be pent-up demand this year as well, but at a lower scale. “We are already a quarter down this year and the situation is still volatile wherein the fear of the third wave surrounds consumer minds and, thus, the sentiment would take relatively more time to pick up for people to divert their interest towards buying a vehicle. A period of subdued spending is likely till the end of July-August 2021.”
Two-wheelers, he said, will experience tardy growth. Extended plant shutdowns and reduced footfalls at dealerships have resulted in a double-digit de-growth month-on-month in the current FY. Going forward, “increased healthcare spend, lower penetration of mediclaim facilities and lower disposable income in the hands of people, particularly in rural areas, might result in slower demand recovery for two-wheelers,” Mehra said.
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