Hit hard by the COVID-19 pandemic, domestic wholesale of vehicles nosedived 75.49% during April-June 2020, with passenger vehicles sales declining for the ninth consecutive quarter — the longest slowdown for the segment in the last 20 years, as per data released by industry body SIAM.
Staring at a “very deep slowdown”, SIAM president Rajan Wadhera said he did not see a case for making more investments in the sector as of now and expected that it would take at least three years to return to 2018 volume levels. Mr. Wadhera also strongly pitched for government measures to push demand.
The passenger vehicle (PV) sales in the country declined 78.43% during the first quarter — the worst impact due to the nationwide lockdown — to over 1.53 lakh units as against over 7.12 lakh units in April-June 2019. “This [PV] slowdown has now gone into nine quarters. It is the longest slowdown in the last 20 years in this segment...it’s also the steepest with a decline of 70% over the nine quarters,” Rajesh Menon, Director-General at SIAM said during a virtual conference.
Likewise, commercial vehicles sales, which are usually seen as an indicator for economic activity, plunged 84.81% to 31,636 units — the fifth straight quarter of decline and the second longest one in 15 years.
The dispatches for two-wheelers fell for sixth consecutive quarter -- the longest in 15 years, by 74% to about 12.93 lakh units.
Outlook
Mr. Wadhera said industry sales are expected to decline 26-45% across various vehicle segments of the industry. He added that coupled with last year, the sector is looking at a de-growth of about 50%. “There are many members who set up new plants in the last two to three years. So, capacities won’t get invested, huge amounts of investment have been done on BS-VI that investments will not be able to recover because volumes would have halved. Therefore, I do not see a case for investments at all,” Mr. Wadhera said.
He added that it would take at least another three to four years to reach the volume levels of 2018. “By when the situation will become normal is anybody’s guess. Commercial vehicles shadow GDP and passenger vehicles are purely consumer sentiment...situation becoming normal i.e., reaching the 2018 volumes will take another 3-4 years,” he said.
Amid lack of revenues and consumer demand, Electric Vehicle plans may take a back seat for most manufacturers, Mr. Wadhera said, replying to a query.
Government action
Noting that there had been no action from the government yet on two main demands of the industry — GST reduction and scrappage policy — Mr. Wadhera said, “We know that the impact of COVID is going to be really very harsh on the auto industry as the impact on the GDP is going to be also very severe. There is a very, very strong need for a demand stimulus.”
Noting that the industry had been in discussion with the government for almost 10 months now, he said the industry was seeking a 10% reduction in GST across all vehicle categories and introduction of a scrappage scheme. “These two are very strong points, we feel the government should act upon. But as of now we haven’t seen any action on both of these.”
He pointed that world over various governments were supporting the industry via direct support to the consumer in the form of a stimulus. “We haven’t given up. We are continuing to engage with the government. They are listening to us. However, we haven’t seen any firm action on the ground,” he said.
