Auto Sector on Road to Recovery Post Lockdown: A Detailed Look
The automobile industry is slowly picking up post the lockdown and we take a look at how it has recovered.
The Indian automobile sector is on a slow road to partial recovery after a series of setbacks this year, the latest sales figures seem to indicate.
Both two-wheeler and four-wheeler manufacturers have recorded decent numbers for the month of June, compared to how the industry fared in the earlier months due to the COVID-19 lockdown.
Cars Are Back on the Roads
Since the lockdown has been lifted in most parts of the country, people have started to move out and resume work as usual.
The demand recovery has largely been driven by the preference of a personal vehicle over public transport. Analysts who track the sector say that high disposable income due to a good harvest in the rural market is another reason that sales are picking up.
Car manufacturers recorded a total of 1,16,928 passenger vehicles sold in the month of June this year, which is a 46 percent drop compared to sales in the month of June last year, which stood at 2,16,877 units.
This is a good recovery if you compare it to the cars sold in the month of May, which was an underwhelming figure of 36,576 units. April was the worst as there were no sales recorded.
According to a recent survey by consulting firm Deloitte, 77 percent of consumers want to limit the use of public transport, 70 percent would want to avoid ride-hailing options altogether, and 79 percent have an intention to own a vehicle.
Car components manufacturers are also gearing up for an increase in demand as they feel that sales will pick up in the days to come.
“No family member will allow you to travel in buses, which can have somebody who has tested positive for COVID-19. So, to save ourselves, we will have to buy our cars, motorcycles, scooters. I feel there is going to be a huge jump in the requirement. So, we are preparing ourselves for that.”Rohit Bhatia, MD, Onassis Auto Ltd
Struggle For EVs
The EV segment is still struggling in India as demand and investments in the Electric Vehicles (EVs) sector has been severely hit due to disruptions caused by COVID-19.
The Federation of Indian Chambers of Commerce & Industry (FICCI) has submitted its recommendation to the government, to seek immediate support from policymakers to enhance attractiveness for EVs in the short term and to encourage continued investments in the sector.
It has also requested the government to take certain steps to prevent a derailment of the sector and to help create demand.
Pre-Owned Cars Are In Demand
The pre-owned car market has also been buzzing post the lockdown phase. Many people are looking to invest in second-hand cars and demand in the 5-10 lakh sedan segment has been the highest.
According to second-hand car dealer Cars24, first-time buyers are “opting for pre-owned cars” and the demand in the last month of June was at 134 percent.
“The Demand traffic has seen a steady growth and was at 134 percent in the last week of June, as more and more people, especially first-time buyers are opting for pre-owned cars, while the supply traffic was at 120 percent as of last week, so we are seeing quite a positive recovery trend there as well.”Gajendra Jangid, Co-founder and CMO, CARS24
Maruti Suzuki True Value, another pre-owned car selling platform, said that it had sold 4.19 lakh units at True Value in 2019-20 compared to 4.22 lakh in 2018-19.
“Currently, we are observing a 10-15 percent increase in demand for pre-owned cars, with major growth in entry segment cars.”Maruti Suzuki True Value
Another player in this market, Spinny, has been executing home test drives and home deliveries and says that sales are returning to a pre-COVID level, having sold “1200+ cars since the lockdown.”
“We have been executing home test drives and home deliveries and, in-fact, are witnessing a sharp increase in inquiries. We are returning to pre-CCOVID-19 level and have clocked 1200+ cars since the lockdown”.Niraj Singh, Founder & CEO
Not only the sales but search for second-hand cars has gone up on platforms like CarDekho.
Two-Wheeler Market Is Picking Up
India is home to some of the world’s largest two-wheeler manufacturers, which is why it is key that sales pick up again. There are more people in India who buy two-wheelers than cars.
Manufacturing giants like Hero MotoCorp, Bajaj, TVS and Honda Motorcycle & Scooters Limiter (HMSI) recorded decent numbers in the month of June, where they were struggling earlier.
Although, the year-on-year comparison shows that even two-wheelers have struggled in Q1 of 2020, the fact that people are buying bikes and scooters again is a sign of relief for the industry.
The Road Ahead
COVID-19 still has a chokehold on the economy and the auto industry is currently restricted from operating at 100 percent efficiency, which means that the process of recovery will take time.
Although cab-hailing services like Ola and Uber have started operations, many are still wary of getting in cars where others have been. Not to mention that public transport like the metro will start again but how many people will actually use it remains to be seen. This implies that more people will be investing in a vehicle of their own.
Industry experts believe that auto sales will be back to normal in Q3 and Q4, though a lot of depends on the economic stability and the purchasing power of the consumer.
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