Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The automotive industry will take 3-4 years to reach its peak 2018-level and requires government support for a faster recovery, according to a forecast by automobile component manufacturer BOSCH.


The company posted a net loss of Rs1.2bn ($16.17mn) in Q1 of fiscal year 2020 (April-June), compared to the net profit of Rs2.8bn ($37.7mn) in the prior year period due to COVID-19 related disruptions impacting the supply chain.


The company’s total revenue declined by 64pc to Rs9.92bn from the prior year quarter. Sales decreased to 68.2pc in Q1 with Powertrain Solutions division registering a decline of 78.3pc. The two-wheeler and Powersports’ segment witnessed a double-digit growth during the quarter.


With gradual unlocking in India, July saw improved registrations of vehicles over June, however, there is uncertainty about actual demand scenario considering the second wave of the virus, said the Federation of Automobile Dealers Association (FADA). Moreover, the Indian economy is expected to witness a sharp contraction with GDP between -4 to -6pc in the current fiscal year.


Auto sales in July witnessed a growth of 17pc from the preceding month to 1.27mn units but lower by 12pc from prior year month.

The companies like BOSCH, Mahindra and Mahindra, Tata Motors and Maruti Suzuki are focusing on getting businesses back to normal levels as capacity utilisation is about 50pc along with weak demand at present. Supply chains are still disrupted as some of the cities are facing fresh lockdown restrictions due to increasing COVID-19 case.


In the post-COVID era, sale of private vehicle is expected to witness an increase as people are likely to prefer private vehicles over public transport out of fear of contracting the virus. 


Amid this lull, India moved to a tighter emission norm for motorised two- and four-wheelers. Several dealers were unable to clear their inventory of BS-IV engines and were left with unsold vehicles worth Rs70bn including 7 lakh two-wheelers, 15,000 passenger cars and 12,000 commercial vehicles, stated FADA.


The Indian government’s economic stimulus package of Rs20 trillion emphasised on the revival of MSMEs, NBFCs and the agriculture sector but no direct support was extended to the auto sector. The auto industry expects some boost in demand via financial aids, reduction in GST and scrappage policy for older vehicles. 


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