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Auto sector may witness double-digit growth in 2021

Automobile gross sales in India are poised to develop in double-digits in 2021, rebounding from the 15-20% drop final yr, when the trade confronted widespread disruptions from the pandemic.

Sales are anticipated to get a lift from a faster-than-expected restoration in financial exercise and vaccination drive in opposition to covid-19, mentioned trade executives and analysts. Increased choice for private mobility can also be prone to push gross sales of inexpensive vehicles and two-wheelers. Commercial automobile gross sales are anticipated to get better after two years as government-funded infrastructure tasks collect tempo.

This may even profit auto components makers whose gross sales are anticipated to develop in double-digits following elevated demand from car producers in addition to in the after-market phase. “While temporary disruptions will impact production and sales in FY21, demand is showing signs of sustenance, supported by rural cash flows, demand for personal mobility, and easy liquidity in the market. The industry has reduced expenses on all other cost heads in H1FY21, and a part of this benefit will be carried forward in coming quarters also,” in line with credit standing company Icra.

Vinkesh Gulati, president, Federation of Automobile Dealers Associations (Fada) mentioned for the reason that lockdown was lifted, the trade has been witnessing top-of-the-line ‘V’ formed recoveries in years, aided by good monsoons and higher harvest, festive demand and wedding ceremony season.

“Lately, we have seen good pent-up demand in passenger vehicles and hopefully, it will stay as safer mobility and new launches this year will keep the demand going. While the industry will witness an overall decline of around 20-25% on a financial year basis, things will start looking better from April, aided by lower base of last year,” Gulati mentioned.

Rajesh Menon, director normal of the Society of Indian Automobile Manufacturers, mentioned the trade noticed one of many steepest downturn in years throughout Q1 as a consequence of strict measures. During this era, home gross sales plunged 75% from the yr earlier to 1.5 million items, inflicting the trade to endure income losses of over ₹2,300 crore every day.

Icra estimates auto components trade’s income to develop by 16-18% in FY22, supported by rising content material per automobile, low base impact and better realizations, partly from the go by means of of the commodity value hike. However, increased freight charges together with a scarcity of components may stay a problem.

“The sentiment remains positive though there are concerns about availability of raw material and increase in commodity prices. As the unlock continues there will be more demand in the rural and urban markets. In FY22, vaccines for covid-19 will also be available which will help generate more demand. After two years, we are expecting recovery in business next year,” mentioned Deepak Jain, president, Automotive Component Manufacturers Association.

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