Automakers stare at a long, dark tunnel, sales in March seen down by 40-80% across segments

MUMBAI: March will likely be the worst ever for Indian automakers, capping a year that’s seen the industry plummet to the lowest in about four years. When initial numbers come out today, sales in the last month of FY20 are expected to have dropped 40-80% across segments in a slump that’s been exacerbated by the Covid-19 lockdown.

Performance in March has eclipsed declines during events such as demonetisation in late 2016, implementation of the goods and services tax (GST) in 2017 and the global financial crisis of 2008, experts said. Passenger vehicle sales are seen at 145,000-150,000 units in March, halving from the year-ago month. Two-wheeler sales are expected to have slipped below a million units, dropping over 45%. Trucks are seen taking the biggest hit with despatches at 25,000-30,000 units, down over 70%. As a result, FY20 cumulative sales are seen dropping to FY16 levels. The total volume of the medium and heavy commercial vehicle segment is expected to be 230,000 units, equivalent to the number sold in FY15.

Weak consumer sentiment, lower stocks on account of shift to BS-6 emission norms and a lockdown for almost a third of the month meant sales crashed, both wholesale and retail. Interestingly, retail demand in the first half of March had been encouraging on account of upcoming festivals.

Lockdown Hits Sales

However, showroom footfall dropped 45-50% in the third week as the coronavirus outbreak took hold around the world.

“It’s a dark hole. There is just no visibility of how to plan for the next month. April also doesn’t look good. It is a crisis. Scenarios are being planned on a daily basis,” said a senior executive at one of the country’s five biggest car makers.

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Passenger car sales have fallen for 18 months out of the last 20, while two-wheelers have posted a decline for 15 consecutive months. The medium and heavy truck market has been dropping for the past 13 months.

March sales were expected to be low because of the previous year’s strong base and recessionary conditions, said Vinod Agarwal, managing director and CEO of VE Commercial Vehicle. The situation however has worsened with the lockdown and closure of plants, impacting the production of BS-6 trucks.

“With the closure of registration authorities, the registrations of BS-4 trucks that need to be completed by March 31 have been impacted,” he said. “And, on the top of it, due to uncertainties related to the lockdown, financiers are also very cautious to finance new trucks, impacting truck sales.”

Until now, the steepest monthly decline for passenger cars was 24% in November 2008, and for two-wheelers it was 18% in December that year. Truck makers also recorded their worst monthly dip of 71% in December 2008. March quarter estimates suggest that these records will be rewritten.

Since the lockdown is till April 14, despatches will be lower this month as well amid plant shutdowns and the coronavirus outbreak impacting consumer sentiment, said Hetal Gandhi, director at Crisil Research.

“Sales for passenger car and commercial vehicle in China had fallen by ~15-20% in January and are estimated to have declined by 75-80% in February 2020,” she said. “We expect similar situation to play out in India, with CV (commercial vehicle) sales declining by over 70% and TW (two-wheelers) and PV (passenger vehicles) by over 35% in March 2020 and 70-80% decline in April’2020 (across segments).”

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