Auto sector sales may remain doomed even post lockdown. Here's why

The report by ratings agency Crisil Research projected that half of passengers vehicle sales and a third of two-wheeler volume are at risk due to the
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Representational image (AP)
Representational image

Auto sales are likely to remain muted as consumers may not flock to dealerships and even avoid shopping malls and markets due to the fear of coronavirus infection for an extended period post lockdown, a report said on Tuesday.

The report by ratings agency Crisil Research projected that half of passengers vehicle sales and a third of two-wheeler volume are at risk due to the coronavirus-induced pandemic.

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Even if the nation-wide lockdown is lifted on May 3, resumption of normal operations at automobile dealerships would depend on whether a dealership is outside a demarcated hotspot and if it has the necessary licences from the state/ district administration to operate, the report noted.

The Ministry of Home Affairs has allowed resumption of several activities from April 20, albeit by strictly adhering to social distancing norms. This covers manufacturing in industrial units, including automobile factories, under the purview of state/ district administration.

In addition, the central government has directed state/ district administrations to calibrate the revocation of lockdown after demarcating districts as red (hotspots with high infection) and green (non-infected) zones.

This implies that the sales outlets in red zones are likely to remain shut even if lockdown is lifted after May 3, the report said.

According to Crisil, GDP growth is forecast to slow down to 1.8 per cent this fiscal, portending demand-side pressures and therefore sales of discretionary automobiles such as passenger vehicles and two-wheelers are likely to remain under pressure in the near-term.

Crisil Research assessed the risk that two-wheeler and passenger vehicle industries face based on a two-factor framework – district-wise automobile sales concentration and the risk of spread of COVID-19, according to the report.

"If a district that accounts for high sales of two-wheelers or passenger vehicles is also impacted severely by the pandemic, it poses a higher risk to overall industry sales," Crisil said.

According to an analysis, top 100 districts account for 62 per cent of passenger vehicle sales in volume terms, with 41 per cent coming from the top 40 districts alone.

In comparison, top 100 districts account for only 45 per cent two-wheeler sales and top 40 for 26 per cent, the report said.

First Published Date: 28 Apr 2020, 20:51 PM IST
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