SIAM sees vehicle sales skidding in current fiscal; EVs to miss the bus

The industry body said that during the current year, the Indian auto sector is looking at a decline between 26-45% depending on the vehicle category. Here is what all the different segments have been going through.

By:Updated: Jul 15, 2020 9:30 AM

The automobile industry, which was witnessing weak sales for most part of FY20, has been dealt a severe blow by the pandemic with industry association Society of Indian Automobile Manufacturers (SIAM) on Tuesday forecasting a bleak scenario for the current fiscal in terms of sales as well as investments. Another casualty would be electric vehicles, where companies are no longer in a position to invest in the new technology and would need government support if the country does not want to miss the EV revolution, SIAM president Rajan Wadehra said. The industry body said during the current year the auto sector is looking at a decline of 26-45% depending on the vehicle category. “Coupled with that of last year, we are looking at a decline of 50% in two years. When the demand is half, I don’t see any case for investment in the sector,” Wadehra said. Though, after the lockdown relaxations, automobile manufacturers have slowly started production, capacity utilisation still remains very low.

“It will take another three to four years to reach the peak level of 2018. So, right now, there is enough capacity in the sector and hence no investment is needed there. Moreover, the auto industry has invested heavily for the transition to BS-VI emission norms in a very short span of three years,” Wadhera added. Prior to SIAM, Crisil research had projected that volumes of auto players are expected to dip to decadal lows in the current fiscal and recovery is expected in FY22 as consumer sentiment and GDP are expected to improve.

The reason cited by Crisil was that buyers would become cautious and less prone to taking loans, which would impact sales of passenger vehicles and commercial vehicles. On profitablity, Crisil’s projection was that operating profitability would moderate by about 200-250 basis points resulting in around 30-35% Ebitda drop in FY21. Players with segmental concentration, especially to CVs, may face higher credit pressure.

Though SIAM and Crisil have given a muted forecast, individual auto players seem to be not that bearish. Maruti Suzuki, for instance, said that retail sales in June have touched 80% of the pre-Covid levels. Similarly, on Tuesday, Hyundai Motor India, director sales and marketing, Tarun Garg said that he expects retail sales to be close to 90% of the July 2019 level, primarily due to strong customer interest in the new Creta, which has received 45,000 bookings since it was launched on March 16, a few days before the nationwide lockdown. He said that in June, Hyundai’s retails sales touched 75% of the June 2019 volumes.

With the Covid-19 pandemic taking a further toll on the already sluggish auto sales, passenger vehicles sales for the month of June nearly halved compared to June 2019. The sales came in at 1,05,617 units in June 2020, compared to 2,09,522 units in June 2019, registering a decline of 49.59%. The numbers did not include data from BMW, Mercedes, Tata Motors and Volvo Auto. Three-wheeler sales suffered a much sharper fall of over 80% with just 10,300 units been sold in June 2020 compared to 51,885 units in June 2019.

Two-wheeler sales also declined during the month, but did better compared to PVs and three-wheelers, supported by demand making a come back in the rural areas. The sales declined by nearly 39% to 10,13,431 units in June 2020 compared to 16,49,475 units in June 2019. Monthly figures of commercial vehicles were not shared as SIAM will be releasing only quarterly data for the category going forward. During the quarter ended June 30, 2020, passenger vehicle sales stood at 1,53,734 units compared to 7,12,684 units in April-June 2019, down by 78.43%.

Commercial Vehicles, which has been one of the worst-hit categories, saw sales decline of about 85% to 31,636 units in April-June 2020 compared to 2,08,310 units in the corresponding quarter last year. Three-wheeler sales came in lower by 91.5% at 12,760 units during the quarter compared to 1,49,797 units in April-June 2019. Two-wheeler sales during the quarter were much better compared to all other categories, though lower by 74.21% at 12,93,113 units compared to 50,13,067 units in April-June 2019.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Latest Auto News