Automobile sector will be severely impacted by the lockdown restrictions in April and May imposed in various states of India to curb the rising number of COVID-19 cases, according to Care Ratings’ report on the sector’s performance in FY21. This would dampen consumer sentiments and hurt demand, which would result in lower wholesales as dealerships will remain shut and put pressure production, the report noted.
The agency noted that there are many festivals in April and May that generally trigger healthy consumer spendings, but the lockdowns will now affect the growth that the industry was expected to experience in these two months.
Auto sector is already facing headwinds in the form of higher input costs, semiconductor shortages and a hike in prices of automobiles would affect demand, the Care Ratings report said.
Indian carmaker Maruti Suzuki has hiked prices of passenger cars by almost Rs22,500 effectively from April 16, the company stated in a press release. The company justified the price hike owing to increase in various input costs.
In June-ending quarter (Q1) sales volumes across segments is expected to be on the lower side owing to the rising COVID-19 cases, especially in worst-affected Maharashtra. The state accounts for a major chunk of sales and houses several manufacturing units, which may suffer the negative impacts of the strict lockdown norms starting April 14. Lockdown may be extended until May if COVID-19 cases continue to rise. Care Ratings further noted that a shortage of vaccines coudl add to the existing problems the economy is facing.
Care Ratings has forecasts passenger sales to be around 2.34mn-25mn units in FY22 (April 2021 – March 2022), which is 5pc less compared to FY21. Two-wheeler sales are expected to rise 7-12pc in FY22 to 16.2-17mn units, Commercial vehicle to rise by 17-27pc to 663,000-720,000 units, while tractors’ sales are expected to remain flat or dip 10pc to 800,000-900,000 units.