NEW DELHI: The second wave of Covid-19 has derailed the recovery momentum of the automobile industry. Demand for products has touched near-zero levels as dealerships and showrooms remain closed due to regional lockdowns. Analysts have now started lowering the sector’s growth outlook for this fiscal over the low base of 2020-21 when total auto sales fell over 13 per cent year-on-year.
In a report published on Thursday, rating agency ICRA noted that domestic two-wheeler volume in FY22 is now expected to grow by 10-12 per cent as against its previous estimate of 16-18 per cent. Passenger vehicle volume, too, will see a lower growth of 17-20 per cent now as against 22-25 per cent expected earlier, it added.
“The significant medical spends have eroded the purchasing power of individuals and families to a greater extent, which would impact large ticket discretionary purchases like vehicles, at least over the near term,” said Shamsher Dewan, vice-president and group head, ICRA Ratings.
Automakers expect the first half of the year to remain relatively weak. “The business scenario is fluid with the second wave of the pandemic hitting the country resulting in multiple lockdowns...This is expected to have a temporary adverse impact on the demand and supply situation. Consequently, the first half of the year is expected to be relatively weak. Sequential improvement in overall performance is expected from the second quarter of FY22,” said officials at Tata Motors.
That apart, the ongoing rally in metal prices could lead to another round of price hikes of vehicles, which could either be of second or third price hikes in the past few months of 2021, it noted. “Another dampener is the rise in fuel prices which shall not only impact consumer sentiments but also logistics and supply chain,” noted Care Ratings.