Slowing GDP growth has caused massive de-growth of passenger car sales in 2019 (source). This have been compounded in 2020 by country wide lockdown, introduced, in late March 2020, to check the spread of Covid-19 induced pandemic. Strict lockdown has brought demand – supply system to near standstill in April 2020.
GDP in second quarter of 2020 crashed by 23.9%. Consequently passenger vehicles sales, too, has declined by 29% in 2020 (January-September), compared to same period last year.
Pent-up demand [Source: Investopedia]
- Pent up demand describes a rapid increase in demand for a service or product, usually following a period of subdued spending
- Consumers tend to hold off making purchases during a recession, building up a backlog of demand that is unleashed when signs of recovery emerge
- Quite often, pent up demand accelerates the economic recovery period immediately following an economic downturn
- Wholesale volume is increasing sequentially with easing of lock down
- Still it cannot be construed as full recovery, as average sales since April, is still much low – at 1,70,167 units
- It seems demand backlog from April and May is getting fulfilled now
- OEMs need to be little cautious over sustainability of pent up demand post festive season
- Because extent of damage done by GDP crash in 2nd quarter of 2020, to unorganized sector, is still unknown
- This may have cascading effect on growth recovery in coming years