Overall auto exports from the country rose 3.9 per cent year-on-year (YoY) between April and December of FY20, despite the continuing depressing sentiment in sales. A report by CARE Ratings shows that automobile sales witnessed the steepest decline of 12.8 per cent YoY in the past five years during April-December. Sales plummeted as price hikes of passenger vehicles and two-wheeler segments due to new safety norms, higher insurance costs, higher ownership costs, liquidity crisis in the NBFC (Non-Banking Financial Companies) sector, reduced turnaround time and increased load carrying capacity for commercial vehicles led to higher inventories and slow movement in segment sales. That apart, lower farm wage growth led by uneven rainfall hurt rural spending.
However, exports showed a contrarian trend in the comparable period. Exports in the passenger vehicles (PV) segment grew six per cent y-o-y, bolstered by higher despatches to Gulf countries, Latin America and South Africa. Two-wheeler and three-wheeler segment clocked 4.6 per cent rise in exports y-o-y. In the period under review, a few auto OEMs (Original Equipment Manufacturers) ramped up exports of existing and new variants to Nepal and Bhutan.
“Within PVs, exports of passenger cars witnessed a y-o-y growth of about 4.4 per cent and MUVs (Multi Utility Vehicles) segment grew by over 11 per cent and that of quadricycles with a small base witnessed a y-o-y growth of about 20.8 per cent during the period. On the other hand, exports of vans registered a decline of 17.4 per cent y-o-y during FY20 (April-December). In case of two & three wheelers, while two wheelers segment exports witnessed a growth of about 6.9 per cent during the period, exports of three wheelers declined by about 8.8 per cent y-o-y”, the report by CARE Ratings noted.
The country's total automobile production slumped 13.1 per cent y-o-y during April-December of FY20 as against 11.3 per cent growth noticed during the same period of last fiscal. In terms of inventory levels, PV inventory is at reasonable levels while that of commercial vehicles has reduced but continues to be above comfortable levels heading into the BS VI implementation as per the latest numbers by the Federation of Auto Dealers Association of India (FADA).
In its forecast, CARE Ratings said that the sales fall in the domestic market is going to exert pressure on overall sales and restrain growth ahead.
“We are credit negative on commercial vehicle segment while retaining stable outlook on passenger and two-wheeler segment. Going forward, we expect demand to marginally improve on month-on-month basis in Q4 FY20 with various planned product launches and pre-buying of automobiles before the implementation of BS-VI norms on April 1, 2020. Also, most of the OEMs in PV segment have announced price hikes from January 2020 to cover the increasing input costs thereby exerting pressure on sales in Q4 FY20”, the report noted.
 "Auto exports")
