India’s automobile demand will be on track demand to despite Covid-19 second wave according to Fitch

According to Fitch Ratings, India’s automobile demand will quickly return if limits are lifted due to a less severe economic impact from the pandemic’s second wave and strong buyer mood. From a low base, this should result in double-digit growth across most segments in the financial year ending March 2022 (FY22). In FY19, sales volume is likely to stay below its peak. “In comparison to last year, we expect that fewer rigorous regulations and fewer business disruption will limit the economic impact. The drop in vehicle sales volume from 4Q FY21 to 1Q FY22 will be slower than the 70 percent drop in 1Q FY21 “Fitch stated.

Due to better clarity on a longer-term economic recovery and the reversal of pay cuts as corporate expenditure normalises from 2020, buyers are more hopeful. Agricultural fundamentals, according to Fitch, remain strong, despite a greater infection rate in the second wave in rural India than previous year. Despite lenders’ reservations, this should enhance funding availability. “Except in the most vulnerable categories, such as two-wheelers, we expect the impact of greater cost of ownership owing to increased gasoline costs and price hikes to be minimal. Due to favourable operating leverage, Indian automakers’ margins would improve in FY22, while pricing hikes will balance increased input prices.”

According to Fitch, the global semiconductor shortage will have a limited incremental impact on Indian automakers because the harshest consequences occur during 1Q FY22, when demand is weak. It also stated that the strategy encouraging the scrapping of older vehicles is unlikely to generate significant replacement demand. However, more outbreaks of infection may cause the predicted recovery in auto sales to be delayed. For the time being, however, the decline in new infections in May precludes more strict or protracted lockdowns.