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Coronavirus impact | 50% passenger vehicle sales at risk, says CRISIL Research

A third of two-wheeler sales also at risk and tactical moves are needed once lockdown is lifted, it said

April 29, 2020 / 01:46 PM IST
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Representative Image


Sales of discretionary automobiles such as passenger vehicles (PV) and two-wheelers are likely to remain under pressure in the near term, as per CRISIL.

According to CRISIL Research, even if the lockdown due to the coronavirus pandemic is lifted on May 3, the resumption of normal operations at automobile dealerships would depend on whether a dealership is outside the demarcated hotspots and if it has the necessary licences from the state/district administration to operate.

It forecasts GDP growth to slow down to 1.8 percent in FY21 due to an estimated fall in demand. The agency used a two-factor framework – taking into account sales opportunity and growth momentum (district-wise), and risk exposure to the pandemic (district wise concentration of COVID-19 cases and risks of spread).

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“The analysis reveals that the PV segment has higher inherent risk compared with two-wheelers, because of a relatively higher concentration of sales in the top 100 districts. These districts account for 62 percent of PV sales and only 45 percent of two-wheeler sales, in terms of volume,” Ajay Srinivasan, Director - CRISIL Research, stated.

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Segregating the districts by the level of risk from the pandemic, the study shows that ‘high impact’ and ‘very high impact’ districts together account for 56 percent of two-wheeler sales and 68 percent of PV sales in India.

In ‘very high impact’ districts, the level of risk is considerably different for the two segments, with half of passenger vehicle sales and a third of two-wheeler sales expected to be impacted.

On the brighter side, 44 percent and 32 percent of the market for two-wheelers and PVs, respectively, lies in ‘very low to moderate’ risk districts, where normalcy is likely to return relatively more quickly, although in a phased manner.

In these districts as well, however, change in customer behaviour, and the impact of COVID-19 on consumer incomes and finance penetration is expected to have an impact.

CRISIL suggests that automakers and vehicle financiers would need to “tactically target” ‘low-to-moderately’ impacted districts and also appropriately retune their strategies in high-to-very high impact districts to minimise the impact on their sales performance.

“Players in the industry will have to devise a strategy after carefully considering their product portfolios, sales distribution by district and dealership presence – all of which are key to pushing volumes in this scenario. Prioritisation of districts on the basis of opportunities and risks will be the new matrix to work on,” Hemal N Thakkar, Associate Director, CRISIL Research, added.

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Moneycontrol News
first published: Apr 29, 2020 01:46 pm

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