PV sales likely to decline in the range of 4-7% in 2019-20:ICRA

Passenger vehicle sales in India is likely to decline in the range of 4-7 per cent this fiscal saying agricultural output, revival in economic and industrial growth would be critical for auto sector's growth despite recent government measures to rekindle demand.

The auto industry has already registered a 21.6 per cent plus de-growth in the first four months of 2019-20, ICRA said adding in the short-term, prevailing subdued rural and urban sentiments would matter besides the upcoming BS-VI emission norms.

"As per ICRA's analysis of the auto sector, the likely decline in passenger vehicles is estimated to be in the range of 4-7 per cent and 0-5 per cent decline for M&HCV trucks in FY2020," the rating agency said in a statement.

The auto industry has been grappling with a tough time since the beginning of the second quarter of FY2018-19 and growth has slowed down, it added.

Weak consumer sentiment across urban and rural markets due to weak farm inflows, subdued agri-commodity prices, rising cost of ownership as a result of regulatory changes including safety, emissions, vehicle registration, along with a rise in interest cost/EMI, have impacted demand.

Moreover, tight liquidity situation among financiers, banks and especially NBFC segment; revision in axle load norms, a slowdown in government spending on infrastructure and; uncertainty related to selection between BS-IV versus BS-VI among buyers, have also played roles in the slowdown, ICRA said.

Commenting on the outlook for the sector, ICRA Senior Group Vice President Subrata Ray said, "In the short-term, much would depend on the meaningful demand recovery post monsoons, especially given the fact that many parts of the country have witnessed flooding. Agricultural output, revival in economic and industrial growth would be critical."
Stating that the recent steps announced by the government is a positive for the sector, Ray said, "The liquidity support announced for the banking system and government spend on infrastructure can be a significant catalyst for the automotive industry."