Auto firms score a duck in April!

The top carmakers around India couldn’t sell a single vehicle to dealers in April, as production shut down in April amid the countrywide lockdown. This is new for car manufacturers around the country as they hope demand revives once the lockdown is lifted.

A massive drop in Domestic Passenger Vehicles!

The chart above shows the YOY% change in domestic passenger vehicles from March 2019 – March 2020. It is evident that the auto sector has been on a steady decline for a year now. Sales tumbled 51% YOY as of 31st March, got significantly worse the following month. This is the worst decline since 1997-98 when the auto industry body started to record data.    

• Auto and Auto manufactures contribute to around 7% of the GDP. No revenues for the value chain has seen it go into cash preservation zone due to liquidity issues
• An increase in upfront insurance cost will have a negative impact on sales
• Slowing demand and loss in consumption prior to the lockdown has contributed to the fall of the auto industry
• The compliance of BS-VI norms will add to the cost of car manufacturers as they look to increase their line-up with BS-VI compliant vehicles

Green Shoots in Auto 

Car executives expect car sales to pick-up gradually post lockdown for the following reasons:

• The demand for ride-sharing through apps like Uber and Ola will likely see a decline. There could be a shift towards people preferring their own vehicles to commute
• People using public transport will also be motivated to get their own vehicles as it is a safer alternative