Auto sales could hit speedbreaker with spike in rural Covid-19 cases

Rural India accounted for 18% of new infections in June, and as much as 40% in Sept; The spike appears to have an inverse relationship with rural sales, says a Crisil note

Vehicles sales' rural market share has declined even as fresh Covid-19 cases have begun to show up more outside city areas than before, according to a research note from rating agency Crisil released on Friday.  

Rural India accounted for around 18 per cent of the new Covid-19 cases in June. This has since risen to around 40 per cent (see chart 1) in September.  The quarterly vehicle sales numbers for rural areas seem to show an inverse correlation with the share in new cases. Rising new cases have coincided with a fall in the rural market share across segments, according to the Crisil note.

Passenger vehicles’ rural share dropped from 36 to 34 per cent between the June and September quarters.  Rural India accounted for over half (51 per cent) of the total two-wheeler sales in June. This fell to 46 per cent in September. The share of commercial vehicle sales also fell from 44 per cent to 43 per cent (see chart 2).

Urban centres have also begun to show increased economic activity as the country eased restrictions amid falling cases. Analysts believe more people are stepping out to purchase their own vehicles in cities too, leading to a recovery in urban market share.