Business Desk, ETV Bharat: Automobile retail sales in India posted a sharp recovery in November, growing over 29% compared with the previous month. But analysts expect this bounce-back to be temporary.
With festivities now over, it is feared that the demand revival seen in November would be difficult to sustain in the coming months.
In a chat with ETV Bharat, Vahishta M. Unwalla, research analyst at CARE Ratings, said that reaching pre-Covid levels of auto sales seems improbable in the current fiscal year.
“Consumer demand for automobiles is expected to stagnate in Q4 FY21 (January-March 2021). The festive season has nearly ended and, hence, near-term demand for automobiles will (only) depend on how quickly the economy progresses and lifts consumer incomes," said Unwalla.
She added: “It is essential for the income levels to rise so that the demand for passenger vehicles and two-wheelers sustain. Revival of the commercial vehicles segment requires more infrastructural spends from government, rise in mining activities, implementation of a vehicle scrappage policy, easy financing, among others.”
Notably, retail auto sales stood at nearly 80% of year-ago levels in November, which reflects an impressive recovery of the sector in a pandemic year. The passenger vehicles category was in fact one of the best-performing segments, with its sales rising 4.2% year-on-year and 16.5% sequentially, as people came out in good numbers to purchase vehicles during the Dhanteras-Diwali period and the marriage season.
Read more: CCI conducts search operations at offices of some cement companies
However, even after an encouraging month of sales, the Federation of Automobile Dealers Association (FADA) sounded cautious regarding the near-term outlook.
While releasing the November vehicle registration data last week, it said: “With festive season now over, heavy rains in certain parts of the country leading to crop damage and pent-up demand almost negligible, demand revival now solely depends on exciting year-end schemes.”
Unwalla raised her doubts on pinning hopes on year-end schemes. “The new schemes and offers to lure customers would benefit only up to an extent. As the pent-up demand is nearly over, we expect the momentum in retail sales to slow down January 2021 onwards.”
She also said that full recovery of all the segments of the auto sector is unlikely until the second half of the next fiscal year. “CARE Ratings’ GDP expectation of -7.7 to -7.9% for FY21 suggests that recovery for segments like M&HCV (medium and heavy commercial vehicles) and three-wheelers is distant and not expected until H2 FY22.”
