India’s auto market set for 2nd straight year of decline, ratings agency says
NEW DELHI, NNA- India’s automobile industry is likely to decline for the second consecutive year as demand sags in the world’s fourth-largest vehicle market, which is hobbled by measures to contain the coronavirus spread, credit rating agency Crisil Ltd. forecasts.
The unit of Standard & Poor’s Financial Services LLC warned on Thursday that overall vehicle sales could plunge to multi-year lows in the fiscal year ending in March 2021 because fears of job losses and pay cuts are hurting consumer sentiment.
“Automobile sales are running out of steam as urban income sentiment wilts under the pandemic,” Crisil director Hetal Gandhi said in a statement Thursday.
In the year that most recently ended on March 31, the auto industry reported an 18 percent drop in overall domestic sales.
Sales of passenger vehicles are expected to decline in the coming year by 24 to 26 percent, two-wheelers could fall 21-23 percent and commercial vehicles would drop 26 to 28 percent, Crisil forecasts.
Tractor sales are expected to decline a more modest 7 to 9 percent as farming is exempt from India’s shutdowns that began March 25, the agency said.
Crisil studied 26,000 companies, belonging to different sectors, with a total employee cost of 7 trillion rupees ($92.7 billion), the director said. Many are likely to see revenue growth fall this fiscal year, the statement said, leading to “higher risk” of job losses or pay cuts.
Prospects of lower incomes and job losses would especially hit the passenger vehicle segment as salaried people, a key demand driver, postpone buying decisions.
Crisil expects demand to recover only from the festival season from October through December, largely for two-wheelers and tractors.
Last month, as the shutdowns were in effect, the auto industry reported zero domestic sales for the first time ever.
The industry group Society of Indian Automobile Manufacturers has issued a dire outlook and warned of a decline in auto sales by as much as 35 percent for some segments.
To catalyze demand, automakers such as the country’s largest passenger car maker Maruti Suzuki India Ltd., a unit of Suzuki Motor Corp., and Nissan Motor India Pvt. Ltd., a subsidiary of Nissan Motor Co., have launched financing schemes.