Auto sales may dip by up to 25% in FY21, sharpest decline in two decades: Report

The automobile sales may decline by up to 25 per cent in this financial year as compared to 2019-20 due to a complete washout in April and minuscule sales last month, according to rating agency Ind-Ra.

The decline (excluding in tractors) would be the steepest in the last two decades, much higher than that recorded during the global recession in 2008-09, and is likely to push industry volumes to the 2011-12 levels, Ind-Ra said in a statement.

The two-wheeler segment is expected to rebound faster, followed by passenger vehicles (PVs), while the decline in medium and heavy commercial vehicles (MHCV) is likely to be the steepest during 2020-21, it added.

The rating agency expects two-wheeler sales to decline by 20-22 per cent, PV by 22-26 per cent, light commercial vehicle (LCV) by 26-30 per cent and MHCV by 35-45 per cent year-on-year in 2020-21.

Also, monthly sales volume may not return to the pre-Covid levels before mid-2021-22, Ind-Ra said.

"Volumes could increase by a high-single to a low double-digit rate in FY22, on account of a pent-up demand; however, it is subject to an improvement in industrial production activities, favourable regulatory changes, increase in consumption levels and a macro economic recovery," it added.

Ind-Ra noted that the rural sector is likely to drive sales growth in two-wheeler and tractor segments.

The strong rabi crop harvest in 2019-20, an expectation of normal monsoon this year and a good kharif harvest forecast, coupled with government incentives and less exposure to lockdown related economic hardships, will boost rural income, it noted.

"Hence, the decline in tractor sales volume is likely to be limited at 10-12 per cent year- on-year in 2020-21," Ind-Ra said.

Exports could come under pressure whileoverall industry revenue is expected to decline by 17-20 per cent year-on-year in the current fiscal, it said.