Following the news that the Society of Indian Automobile Manufacturers (SIAM) has cut domestic vehicles sales projection by 15.2% to 18 million units in FY2021, Animesh Kumar, director of automotive consulting at GlobalData, offers his view:
“Coronavirus (Covid-19) has impacted the Indian automotive industry, which was already reeling under the slowdown in sales volumes. Due to the outbreak, production has come to an abrupt halt and the lockdown is keeping potential buyers away from dealerships. Automotive OEMs and dealers were tackling the issue of BSVI transition and were scampering to get rid of BSIV inventory. The lockdown, though completely justified, created an added pressure, especially for dealers of two-wheelers as they were left with a large BSIV inventory. Now, the industry players are facing several challenges including supply chain disruptions, production cuts or halts, declining sales volumes and cash flow pressures.
“According to SIAM, auto sales nosedived by nearly 50% year-on-year in March 2020. The dealerships witnessed significant decline in footfalls in early March and with the 21-day lockdown coming into effect from 25 March, the footfalls completely stopped. Though it comes as a desperate measure, dealers are now compelled to explore digital sales and transformation, which is a positive development and right step towards the future.
“With the automotive industry now encountering both supply as well as demand side challenges, associations, industry participants as well as experts/analysts are compelled to revise the forecasts. SIAM has revised the volume forecast for FY2021. SIAM now projects revenue generation of Rs. 560 bn from the auto sector in FY2021, which is 85.19% decline compared to FY2020.
“GlobalData estimates that the sales of new light vehicles will stand at 3.15 million units in CY2020, which translates to a year-on-year decline of 10.8%. GlobalData has considered the impact on sales during Covid-19 outbreak. Moreover, the state of the economy after the end of Covid-19 outbreak as well as the state of consumer sentiments & confidence and disposable income have also been factored in.”
