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Car and SUV sales closed 18 percent lower in FY20 at 2.77 million units

The lockdown announced by the government to prvent the spread of novel coronavirus, or COVID-19, resulted in a 51 percent decline in passenger vehicle sales (car, SUV and van) for March at 143,014 units as compared to the same month last year.

The passenger vehicle segment closed the year in red for the first time in six years. Last time the industry recorded a drop was in 2014. The segment had been under pressure for the whole of FY20 because of a series of reasons including steep hikes in insurance costs, poor buyer sentiments and hike in prices.

Sales for FY20 closed 18 percent lower at 2.77 million units, data shared by the Society of Indian Automobile Manufacturers (SIAM) revealed.

Added costs of upgradation to Bharat Stage VI (BS6) from April 1 will cripple the retail demand when the lockdown is lifted. Discounts are also expected to take a knock considering the financial stress amongst dealers due to the lockdown.

Commercial vehicle sales for March declined by a whopping 88 percent to just 13,027 units. For FY20, the same closed down 29 percent to 717,688 units.

CV segment have been be hit the most during FY20 following additional issues such as overcapacity in the cargo segment due to change in axle load norms. No revival in demand is expected in CV segment at least for the next three quarters.

“With cash flows of fleet operators also under pressure, replacement demand for new trucks is likely to remain muted till any meaningful pick-up in the economy and infrastructure projects fructify. An improvement in economic environment and resolution of liquidity constraints remain critical for a sustained revival in the industry”, said a report from ICRA.

Two-wheelers saw a decline of 40 percent to 866,849 units during March. For FY20, volumes were down 18 percent to 17.41 million units.

The two-wheeler segment is expected to be amongst the first to bounce back if the economy revives considering that more than half of volumes generate from rural pockets where the impact of the slowdown is not as severe helped by the variety of welfare schemes initiated by the government.

“ICRA continues to maintain a volume CAGR estimate of 6-8% for the two-wheelers segment, backed by positive structural factors like favourable demographic profile, growing middle class, low two-wheeler penetration, improving financing availability, participation of women in workforce and rapid urbanization”, added the ICRA note.

Three-wheelers sales fell 58 percent in March to 27,608 units. They were down 9 percent to 636,569 units in FY20.Vehicle manufacturing factories and dealerships across the country are shut since March 23 and will most likely remain shut for the remainder of April.

Post Author: Stangrowth