Plunge in Q2 auto sales washes out Q1 gains in rural markets, says Crisil

High coronavirus infections in hinterland during the second quarter had an unusual collateral victim - auto demand that plunged during the period as against soaring sales in the previous three months - almost wiping away the high double-digit growth in the June quarter, according to a report.

When the nationwide lockdown was imposed on March 25, there were just under 500 infections across the nation -- mostly in Mumbai and Kerala. But since then it steadily rose and today the caseload is upwards of 8.4 million and around 125,000 death due to the pandemic.

During the first three months of the lockdown, as much as 82 per cent of infections were in large urban centres. In the second quarter, however, the share of rural infections more than doubled to 38 per cent.

In the first quarter this fiscal, the share of rural markets in automobile retail sales increased year-on-year, while that of urban regions dropped.

That's because when the pandemic barreled into the country, it rammed urban regions first with 82 per cent of the cases were in those areas at the end of the first quarter. The rural regions, with only 18 per cent of the caseload, were less affected, Crisil said in a report on Friday.

However, in the second quarter, the pandemic penetrated deeper into the hinterland, and the share of fresh rural cases more than doubled to 38 per cent by September. Thus, the share of rural regions in automobile sales dropped sequentially across segments in the quarter, it added.

Between the first and second quarters, the rural caseload jumped 21.5 times, while the same in urban centres rose only 8.5 times, the report said.

"While car sales in the hinterland rose 36 per cent in Q1, it tanked 34 per cent in Q2. Similarly, two-wheeler sales plunged 46 per cent in Q2 as against a 51 per cent jump in Q1, and when it comes to medium commercial vehicles, Q1 saw a 44 per cent rise in sales, which plummeted by 43 per cent in Q2," it added.

This means that the second quarter wiped out the entire gains in the first quarter.

After increasing in the first quarter, the share of auto retail sales in rural markets has declined sequentially, owing to an increase in caseloads, said Crisil, which is based on the retail sales in 410 districts with over 60 per cent population in rural areas. The sales numbers exclude data from Andhra Pradesh, Madhya Pradesh and Telangana.