The stress on India’s auto trade will proceed in FY 2021 on account of COVID-19. In accordance with Fitch Scores, the profitability will proceed to be weak as demand will take successful in FY21.
The implementation of BS VI in April 2020 will improve manufacturing prices. The score company mentioned, “Indian automakers reported sharper volume declines and weaker profitability in the last quarter of the financial year ended 31 March 2020 (4QFY20) than in the quarter earlier, as slowing GDP growth and weak consumer sentiment reduced volumes and led to higher discounts by automakers.”
The gross sales in all key auto classes fell sharply in 4QFY20 from 3QFY20 when reductions provided by automakers throughout the festive season helped to gradual the downtrend in gross sales that began at first of 2019. “Auto sales were affected by weak consumer sentiment as quarterly GDP growth slowed over FY20 and buyers’ preference to wait for newer, BS6-compliant models,” it said.
Home gross sales quantity of passenger automobiles (PV) fell by 22 per cent yr on yr in 4QFY20, in contrast with a decline of 1 per cent in 3QFY20, in keeping with the Society of Indian Vehicle Producers. Gross sales quantity of economic automobiles (CV) and two wheeled automobiles fell by 48 per cent and 25 per cent, respectively, in 4QFY20. Exports of PVs and two wheelers elevated by 0.2 per cent and seven.three per cent, respectively, throughout FY20, however they may not offset the general decline in home gross sales.
Fitch said, “We expect volumes to partly recover in the second half of FY21 as sales gradually increase after the easing of lockdown measures since May. However, overall volumes could decline by more than 20 per cent in FY21 as customers choose to delay spending on big-ticket discretionary items amid a weak economic outlook and due to higher prices with BS6.”