Covid curbs put vehicle sales at risk

Sales of more than half a million light vehicles, including cars and SUVs, over a million motorcycles and scooters, and tens of thousands of trucks are at risk due to localised lockdowns and mobility curbs enforced by states to tame the second Covid-19 wave.Leading research and sales forecasting agencies have revised downward their unit sales estimates for FY22 by 5-10 percentage points. They believe business lost in April and May would be hard to recover through the latter half of the year, especially as the world battles a shortage of semiconductors that drive new-age cars.Vehicle retailing in India declined more than 30% in April, registration data showed, and is expected to fall to just a quarter of May 2019 figures this month. Revised FY22 forecasts show that passenger vehicle (PV) sales could be in the region of 3.1-3.3 million units, and two-wheeler sales at 16.3-17.1 million.82928491These forecasts do not factor in a third wave of Covid-19.“The impact would be majorly seen in the first quarter of FY22, although with the pace of vaccination picking up, we estimate a slow normalisation of demand by the end of the second quarter,” said Hetal Gandhi, director, Crisil Research. Rural ImpactThe agency has slashed its growth forecast for both PVs and two-wheelers by 700-900 basis points to 14-19% and 8-13%, respectively. One basis point is 0.01%.Unlike the first wave, the second wave has hit deeper into the rural heartland and caused many more deaths, eroding the purchasing power of many families that lost breadwinners. Rural distress could severely hit two-wheeler sales, particularly those of entry-level bikes. In FY21, bike and scooter sales declined 13% to 15.1 million units while PV sales declined 2.3% to 2.7 million units.“As the reopening of colleges and offices gets delayed until the end of the Covid-19 wave, two-wheeler demand could remain subdued in the near term,” said Shruti Saboo, associate director, India Ratings and Research. “The second wave has affected semi-urban and rural areas as well, which are major drivers of two-wheelers sales, thus impacting overall demand.”

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