172@29@17@107!~!172@29@0@53!~!|news|technology|auto|automobile-sales-may-fall-20-25-this-fiscal-ind-ra-5900651.html!~!news|moneycontrol|com!~!|controller|infinite_scroll_article.php!~!is_mobile=false
Moneycontrol
Watch experts decode 'The rise of ESG investing' on October 29 at 4pm. Register Now!
Last Updated : Sep 29, 2020 05:44 PM IST | Source: PTI

Automobile sales may fall 20-25% this fiscal: Ind-Ra

The latest forecast is marginally better than the earlier forecast of 22-25 percent YoY decline in sales volume in FY2021, released in June this year, Ind-Ra said.

PTI

Rating agency Ind-Ra expects automobile sales to decline by 20-25 per cent this fiscal against its earlier forecast of 22-25 percent on account of increasing preference for personal mobility and an expected demand rebound from rural and semi-urban markets.

At the same time, the rating agency has maintained a negative outlook for the auto sector for the second half of the fiscal, owing to continued weak consumer sentiments and macroeconomic headwinds amid the disruptions caused by the pandemic, Ind-Ra said in a release.

The latest forecast is marginally better than the earlier forecast of 22-25 percent YoY decline in sales volume in FY2021, released in June this year, Ind-Ra said.

Close

Favourable regulatory changes such as GST cuts or incentive-based scrappage policy could help demand revival in the medium-term, the ratings agency said.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

It, however, warned that any significant spread of the virus to rural India could affect the recovery trend due to further disruptions in those parts of the economy.

Favourable regulatory changes such as GST cuts or incentive-based scrappage policy could help demand revival in the medium-term, the ratings agency said.

Both passenger vehicles (PVs) and two-wheelers (TWs) sales could fall 18-21 percent YoY in this fiscal while the decline in the commercial vehicles (CVs) sales would be 30-35 percent YoY in FY2021, on account of lower economic activities, it said.

Ind-Ra further expects auto volumes could post double-digit growth (in mid-teens) in FY22 primarily due to a lower base over FY20-FY21.

According to the ratings agency, lower affordability due to job losses/ loss of income would shift consumers’ preference towards lower-end vehicles, especially PVs.

In 2Ws, motorcycles will continue to outperform scooters as the former derives substantial demand from rural markets, it said adding CVs and more specifically medium and heavy CVs would continue to see a muted demand due to lower industrial production and excess capacity in the system, and any demand revival, therefore, is unlikely before the fourth quarter of 2021-22.

Light commercial vehicles are likely to benefit from increased e-commerce, and last mile transportation particularly for essential commodities, it said in the release.

Ind-Ra also said it expects limited rating movements in the sector in H2FY21 and therefore has maintained a stable rating outlook.

The ratings agency said it expects revenues to decline 16-20 percent YoY during the year with EBITDA margin contracting 100-150 basis points on lower operating leverage, leading to moderated credit metrics in FY21.

However, lower leverage and robust liquidity are likely to continue to provide strong financial flexibility, it said, adding original equipment manufacturers (OEMs) with greater presence in agriculture-based markets are likely to benefit.

The supply-side risks continue to persist, despite unlocking, given the swift spread of COVID-19 in tier-I/ tier-II cities where several plants of OEMs and auto ancillaries are located, as per the release.

Further, as capacity utilisation picks up, the issues related to lack of trained manpower, due to reverse migration, could emanate, it added.
First Published on Sep 29, 2020 05:43 pm
Sections