Auto spare revenues may drop 11% as lockdown persists in 75 key districts

Crisil Research says the 75 districts together account for a huge chunk of automobile sales by OEMs and 46% of the automobiles sales in the country

Revenues in the auto aftermarket segment are expected to drop by around 11 per cent in Fiscal 2021, with industry experts attributing the decline to a partial or full lockdown continuing in top 75 districts that account for nearly 43 per cent of industry's top line.

Aftermarket refers the automotive industry's secondary market which catering to replacement of original equipment (OE) parts. The categories include tyres, engine oil and lubes, parts, electricals, brakes and suspension among others. 

Ajay Srinivasan, Director, Crisil Research said that the 75 districts together account for a significant chunk of automobile sales by OEMs and 46 per cent of automobiles sales in the country. 

While on the one hand new vehicles sales are dipping, on the other, the annual running of vehicles (in kilometers) is expected to fall, with three-wheelers likely to see a decline of 22 per cent and passenger vehicles and tractors dipping four per cent during the fiscal. Utilisation of Commercial Vehicles in May was only 25-30 per cent.

Aftermarket automotive spends are driven by annual running and replacement frequency, Srinivasan added. Crisil expects utilisation to touch pre-Covid levels only by September once factories and businesses restart and reach normal tempo.

In two-wheelers, another challenge according to Crisil, is that a high proportion of aftermarket spend goes towards tyre- and engine oil-replacement, which will be lower as both are directly linked to annual running. Besides, two-wheeler owners are likely to heavily downtrade or opt for cheaper aftermarket options, given the economic slowdown.