Auto sales could crash in May over lockdown woes

Passenger car sales at the retail level are estimated to have crashed by 75% to 80,000 units in May compared to its recent peak of 348,000 units in March, according to several people in the know. Monthly volumes have also slipped to a year’s low. Rising Covid-19 caseloads in April and May compelled over 90% of states to announce localised lockdowns, pulling down the shutters on auto dealers.Deliveries to customers fell from 348,000 units retail in March to 192,000 in April, before slipping to 80,000 in May. Despatches from factories to dealerships in May are expected to be slightly higher at around 90,000-100,000 units.Overall production of two-wheelers is expected to decline by 62-65% to 750,000-800,000 units in May, according to the output plans of two-wheelers vendors. Put together, the potential revenue loss for two-wheeler and passenger carmakers would be around Rs 17,000 crore in May, while the government received nearly Rs 4,500 crore less revenue because of steeply lower sales volumes.Over a dozen states, including large ones like Maharashtra, Uttar Pradesh, Delhi, Tamil Nadu and Karnataka — which account for over 60-70% of national vehicle sales — have decided to extend the lockdown-like restrictions by a week to 10 days.83103393The mismatch between demand and supply is likely to widen, said Shashank Srivastava, executive director, sales and marketing, at Maruti Suzuki.“June is going to pose a much bigger challenge in terms of business planning and decision making. While the markets continue to be under lockdown, the factories have resumed production, so the supply-side issues will be addressed; now the challenge will move to securing retail, which will only happen on unlocking,” he said.The industry is sitting on pending orders of about 350,000 units.Inventory at dealerships prior to the lockdown were still low, at around 15 days, but that will be adequately replenished, with markets remaining closed and factories operating. The production decline has been pronounced on the two-wheeler front, but a little brighter for export-heavy companies such as Bajaj Auto and TVS Motor. Since these two companies have been able to deliver on their overseas commitments, the decline in the export volumes is expected to be limited.

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