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There has been a slump in the Indian automotive sector since the third quarter of the 2018 fiscal. Higher acquisition cost, liquidity crunch and weaker consumer sentiments can be attributed as the prominent reasons. The lockdown imposed due to the Covid-19 pandemic has further deteriorated the situation. According to the latest data revealed by Society of Indian Automobile Manufacturers (SIAM) in the April-June period of the FY2020-21, domestic sales witnessed a massive decline of 75.49% to reach 14,91,216 units. During the same time last year, the figure stood at 60,84,478 units.

Rising demand for personal vehicles

Sukanta Mukherjee, General Manager, Sales, Mukesh Hyundai told BE, “There was no business for almost two months during the lockdown. This has probably led to a pent-up demand that we are supplying to now. However, whether this demand is temporary or will continue, only time will tell.” He added, “At present, there is a demand from people who are able to afford a car but were using public transport earlier. In the current scenario, they are reluctant to use public transport to ensure their safety against the spread of the Covid-19 pandemic.” According to a report by The Economic Times on July 30, Maruti Suzuki, India’s largest car manufacturer, registered a 15-20% jump in retail sales in Bihar, Jharkhand and Himachal Pradesh in June. Sales have also gone up in West Bengal, Uttarakhand, Tripura, Meghalaya and Arunachal Pradesh.

There is also a growing demand for two-wheelers in the domestic as well as international markets. Soumen Ray, CFO, Bajaj Auto recently said to the PTI, “We are seeing month-on-month improvement in sales. There was no sale in April while the decline was very large in May. June was significantly better than May and July has been much better than June.” The company sold 1,85,981 units in the domestic market between April and June which is down by 69.55% from the 6,10,936 units sold in the same period last year. However, Ray also said that commercial three-wheeler vehicles are lagging in demand as such vehicles are mostly bought by taking loans and in the current scenario where the business opportunities are limited, no one is interested in taking fresh loans.

No market for commercial vehicles

Though there is a growing demand for private vehicles at present, the picture for commercial vehicles is rather bleak. Recently, ratings agency ICRA said in a statement that the domestic commercial vehicle industry volumes are expected to contract by 25-28% in FY2020-21 which is the lowest level in more than a decade. ICRA also added that growth would be optically better in FY2021-22 at 24-27% but recovery to industry volumes of even the 2017-18 fiscal would remain some time away.

Prospects

The festive season of Durga Puja and Diwali is not very far and usually there is a lot of demand for vehicles during the festive season. Reacting to this, Mukherjee stated, “This time, such bookings have not started yet. The purchases that are being made now are out of necessity and compulsion and not because of festivity. A pandemic is a rare crisis and what impact this will have in the long run and how the market will revive cannot be said conclusively at this moment.”

In order to boost their business, Mahindra & Mahindra has recently introduced new affordable finance schemes. These schemes include EMI starting as low as `899 per lakh for personal utility vehicles. The company said to the media that it has included up to 10% of ex-showroom price funding options for accessories for personal vehicles and the first nine months EMI will be 50% lower than regular EMIs for personal vehicles. Market insiders feel that this easy financing scheme may somewhat boost the sales in the personal vehicles segment.

At present, there is a lot of emphasis given on solar and electric vehicles. Reacting to this, Mukherjee stated, “Hyundai has launched Kona which is an electric car but it is very expensive at the moment.” The electric five-seater hatchback car is available in India at a price range of `23.75 lakh to `23.94 lakh. At present, though there is at least a temporary growth in demand for personal vehicles, sales of commercial vehicles are continuously going down and only time will tell the real impact of the Covid-19 pandemic on the automobile sector.