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Auto Industry Made a stellar comeback in spite of Covid 19 but fears of derailment are back!

Updated: Apr 17, 2021

The Auto Industry bounced back resiliently in the second half of FY2021 in spite of the continuing Covid19 woes and their effect on the economy. This could be largely due to the customers preferring a personal vehicle, to minimize exposure to infection.

The decline in volumes was lower than the worst feared by the analysts and industry experts. As per the rating firm Care Ratings, Q3 in FY2021 saw a turnaround in the industry with the wholesale and retails registering positive figures. This could have been due to pent-up demand, festive season, wedding season, and the rural economy holding ground and growing in the Covid19 times.

“It is noteworthy that by the end of the year, the automobiles industry made a comeback. Tractor sales were unaffected through the year and in fact, FY21 was one of the best years for this segment. The passenger vehicles domestic wholesales reached nearly the same levels as last year (-2.3% Y-o-Y), while two-wheelers managed to clock 85% sales of last year," said analysts of Care Ratings in a note.

At the beginning of FY21, SIAM had feared that the sales volumes could drop by 25-45% due to the many restrictions including lockdowns in many states, to contain the spread of the Covid19 virus.

“The commercial vehicles segment, which was the first to be affected by lockdowns saw Q1- FY21 as a complete washout by witnessing just 30,000 units of domestic sales. However, as the economy opened up, their sales grew and in the last quarter, it clocked 2.1 lakh units of sales, the highest since Q4-FY19. On a cumulative basis, commercial vehicles segment reached 80% of last year’s volumes," the rating firm further added.

However, FY2122 could face more challenges. After a lull, the second wave of the Covid19 is open the nation. The number of cases and the virulence of the virus is supposedly more dangerous than the first one. Already strict lockdown type measures have been announced in India’s most economically advanced state of Maharashtra. The other industrialized states of Gujarat, Karnataka, Delhi, Madhya Pradesh, Chattisgarh, Tamil Nadu as also the rest of India is already in the grip of the second wave and imposing restrictions to trade and movement of goods and people.

There has also been panic amongst the semi-skilled and skilled labor class. This could lead to reverse migration and have a direct impact on the service sector, especially in the metros and large cities. It could first impact the Two-Wheeler sales adversely.

And lockdowns imposed during the festive period of Gui-Padwa, Baisakhi, Ramazan, etc will only increase the impact.

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