50% Of Passenger Vehicle Sales At Risk Due To Coronavirus: Crisil

Publish On: 29 Apr, 2020 11:19 AM | Updated   |   Madhurima  

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

Sales of discretionary automobiles like passenger vehicles and two-wheelers are likely to stay struggling within the near term, it said.

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

"Besides, GDP growth is forecast to hamper to 1.8 per cent this fiscal, portending demand-side pressures."

In order to observe the intensity of risk for automobile sales, the unified research house stationed a two-factor framework, comprising the industry's sales opportunity and also the size of risk from Covid-19.

"The opportunity was captured in terms of district-wise concentration of sales and growth momentum, and therefore 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 amount of risk is considerably different for the 2 segments, with 50% 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 marketplace for two-wheelers and passenger vehicles, respectively, lies in 'very low to moderate' risk districts, where normalcy is probably going to return relatively more quickly, although in a very phased manner," the study said.

"In these districts also, there'll be a change in customer behaviour, and therefore the impact of Covid-19 on consumer incomes and finance penetration. Due to this, automobile companies and vehicle operators will have to tactically target districts which have been low-to-moderately impacted and also appropriately re-align their strategies in high-to-very high impact districts to minimise the impact on their performance of sales. "

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The associate director, who belongs to CRISIL research, Hemal N Thakkar said: "Players from the industry will need to come up with a method 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 is going to be the new matrix to work on."