Cars, other vehicles may get costlier from January; automakers may suffer this much loss in FY21

India’s automobile companies will have to travel a long way before attaining normalcy in sales and revenue. While the demand for passenger vehicles is expected to remain low in the remaining months of the current fiscal year, manufacturers are also likely to raise prices to offset the rise in the input and commodity prices. These factors may lead to up to 14 per cent on-year contraction in the wholesales of passenger vehicles, said a report by Care Ratings. Among the other automobile segments, wholesales of 2-wheelers may drop up to 18 per cent; 3-wheelers up to 73 per cent; and commercial vehicles may drop up to 30 per cent in FY21.

On the other hand, tractors have been the best performing segment in FY21 so far as a resilient rural economy has spurred demand for this agricultural machinery this year. Domestic wholesales are expected to lower between December 2020 and February 2021, and pick pace from March 2021. It is expected that the domestic wholesales of tractors will grow up to 16 per cent in FY21.

Covid-19 hits CV sales; its vaccine distribution drive will rescue

However, it is to be noted that due to its high linkages with the country’s economic activities, commercial vehicles are the first segment to decline and last to recover when a country witnesses a downward trend. It is expected that domestic transportation of Covid-19 vaccines could act as a new demand driver for CVs in near future.

Gauging the growth of the automotive sector is important as it has linkages with multiple industries. Manufacturing vehicles require steel, iron, aluminium, paint, plastic, glass, leather, electronics, rubber, etc. Alongside, this sector is a significant contributor to the banking/NBFC industry in the form of automobile financing, which is one of the most common forms of retail loans.

The sector is also one of the largest spenders on advertising and among the main end-users of oil and gas. The automotive sector’s vast value chain present across the entire Indian economy contributes nearly 40 per cent to India’s manufacturing GDP. Hence, this sector has the potential to bring inclusive growth and community development, along with job creation. Meanwhile, the automobile OEMs, dealers, and ancillaries suffered Rs 2,300 crore loss per day and an estimated job loss of about 3.5 lakh during the lockdown.