Covid-19 puts 50% of passenger vehicle sales at risk: Crisil

Mumbai: The economic fallout of Covid-19 pandemic puts 50 per cent of passenger vehicle sales at risk, a study by Crisil Research showed on Tuesday.

Sales of discretionary automobiles such as passenger vehicles and two-wheelers are likely to remain under pressure in the near term, it said.

“As things stand, even if the nation-wide lockdown is lifted on May 3, 2020, resumption of normal operations at automobile dealerships would depend on whether a dealership is outside the demarcated hotspots and if it has the necessary licences from the state or district administration to operate,” Crisil Research said.

“Besides, GDP growth is forecast to slow down to 1.8 per cent this fiscal, portending demand-side pressures.”

Accordingly, to capture the magnitude of risk for automobile sales, the integrated research house deployed a two-factor framework, comprising the industry’s sales opportunity and the size of risk from Covid-19.

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“The opportunity was captured in terms of district-wise concentration of sales and growth momentum, and the risk in terms of district-wise assessment of present case intensity and further risks of virus spread,” the study said.

“Segregating the districts by the level of risk from the pandemic, the study shows that ‘high impact’ and ‘very high impact’ districts together account for 56 per cent of two-wheeler sales and 6 8 per cent of passenger vehicle sales in India.”

As per the study, in ‘very high impact’ districts, the level of risk is considerably different for the two segments, with half of passenger vehicle sales and a third of two-wheeler sales expected to be impacted.

“On the brighter side, 44 per cent and 32 per cent of the market for two-wheelers and passenger vehicles, respectively, lies in ‘very low to moderate’ risk districts, where normalcy is likely to return relatively more quickly, although in a phased manner,” the study said.

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“In these districts as well, ther will be change in customer behaviour, and the impact of Covid-19 on consumer incomes and finance penetration. Given this, automobile manufacturers and vehicle financiers need to tactically target low-to-moderately impacted districts and also appropriately retune their strategies in high-to-very high impact districts to minimise the impact on their sales performance.”

Hemal N Thakkar, Associate Director, CRISIL Research, said: “Players in the industry will have to devise a strategy after carefully considering their product portfolios, sales distribution by district and dealership presence – all of which are key to pushing volumes in this scenario. Prioritisation of districts on the basis of opportunities and risks will be the new matrix to work on.”

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