Icra sees overall automotive volumes in FY21 being pushed back by 10 years

Rating agency expects GDP to decline by 11% in FY21; this will trickle down into lower demand for the automotive industry in general

A sequential recovery is underway across all segments of the automotive market, but this will not negate the possibility of a decline for the full year that ends on March 31, said Icra in a webinar on Wednesday. The Indian automotive industry is battling tough times due to a general economic slowdown coupled with Covid-19 induced pandemic lockdowns. T The fall in demand is also being reflected in capacity utilisation which is likely to dip below 45 per cent in FY2021, from 50-55 per cent in FY2020 for PVs and 36 percent for M&HCVs.  

The ratings agency expects the GDP to decline by 11 per cent in FY2021; this will trickle down into lower demand for the automotive industry in general (except tractors). Overall, it expects the volumes in the automotive segment to get pushed by over 10 years.

Of all the segments, the medium and heavy commercial vehicles (MHCVs) that have it fortunes closely tied to the economic growth are expected to take maximum hit as a sluggish economic activity has weighed on the sales of such vehicles. The M&HCVs and Buses segment growth will decline to (-35% to -40%) in FY2021 and will grow by 40-45 per cent in FY2022 while LCVs will witness a slower decline of (-17 per cent to -20 per cent) and grow by 15-20 per cent during the period. The segment faces multiple headwinds due to over capacity, global meltdown, financing issues, lower GDP growth and subdued freight availability, mining ban and infra issues among others. ICRA projects the current scenario to drag down the MHCVs and LCVs sales to 18 and 10 year lows.

The PV market is expected to witness 22-25 per cent decline in volumes in FY2021. A contraction in GDP, consumer sentiments which are currently at historic lows; this recessionary environment has resulted in purchase deferrals. While the industry was hit hard in Q1 FY2021; most PV and two wheeler makers have started operating at pre-Covid level capacity utilisation during Sep-2020 (inventory re-stocking at dealership also supported wholesale dispatched during September 2020) which is a positive. ICRA expects the PV industry volume to witness strong double-digit growth (more than 15 per cent) in FY2022. This will be after two consecutive years of decline at (-17.9 per cent) in FY2020 and (-22 per cent to -25 per cent) in FY2021.