Will People Buy More Cars & Bikes Once Lockdown Lifts?
With economic uncertainty and lower discretionary spending, buyers may be wary about spending on new vehicles.
If the Indian automobile market wasn't having a bad enough time in the past two years, with sales falling, the coronavirus pandemic has completely upset all sales projections and plans that automakers had.
The last month of sales saw a sharp dip across segments before the lockdown was imposed, which has led to some dealers stuck with unsold BS-IV compliant vehicle inventory. The court has allowed the sale of these vehicles for 10 days after lockdown lifts to clear stocks.
In March 2020 alone, there was a 61 percent drop in sales of new vehicles compared to the previous year as the impact of the COVID-19 pandemic spread. Production had already begun to suffer because about 27 percent of automotive parts for India come from China.
Switch to Private Vehicles?
So, will Indian consumers, who have been locked in for over 40 days be ready to invest in a new vehicle given that social distancing and staying away from crowded spaces will still be the norm? Most of the carmakers we spoke to weren't keen on giving any projections on sales. The answer we mostly got was to wait for production to restart.
RC Bhargava, chairman, Maruti Suzuki told The Quint that it's too early to make predictions for sales until production resumes fully and it is business as usual in the market.
“I would be unable to predict how sales would go unless we open and some evidence of consumer behaviour is available.”RC Bhargava, Chairman, Maruti Suzuki India
However, some industry watchers expect that there may be an uptake in buying of private vehicles as many would want to stay away from public transport for hygiene reasons.
Let's look at how the response in China has been pre and post the coronavirus outbreak. An IPSOS survey shows that consumers are considering a shift to private transport and shying away from buses or the metro. The biggest reason 77 percent of respondents gave for the purchase of a car was that there would be less risk of infection.
However, the Indian market would likely be different. As Bhargava says, there are other factors that will determine demand, especially the state of the economy.
“That (hygiene) may be a factor, but it is not the only factor for determining total level of demand.”RC Bhargava, Chairman, Maruti Suzuki India
Given the wariness around using public transport because of maintaining social distancing norms, there are predictions that for short commuting there could be a spurt in two-wheeler buying. Or even of small second-hand cars.
Shreyas Shibulal, founder of Micelio, a startup-fund that invests in electric mobility says things could be quite different post lockdown.
Human psychology is going to play a large role. Shared mobility is a space that people have been making large bets on in the past couple of years, but post this crisis we will have to see how different the scenario is going to be.Shreyas Shibulal, Founder, Micelio.
Going by the trend in China, people are intending to purchase vehicles that score high on health-oriented features – such as a germ filter in the air-conditioning system.
In India, industry watchers say the demand for shared mobility services like Ola and Uber may go down despite these companies promising sanitised vehicles. However, there could be a rise in longer lease rentals from companies like Zoomcar and Revv.
Used cars outsold new cars in the last financial year with about 40 lakh used vehicles being traded compared to 27 lakh new cars in India. With economic uncertainty and job losses, discretionary spending on cars would drop. Hence, buyers are more likely to shop in the used car market rather than spend more on a new car.
Also, with periodic lockdown or restrictions likely to be in place until a vaccine or permanent cure for COVID-19 is found, work-from-home and limited commuting is likely to be the new normal, leading to reduced demand for new vehicles in the short term.
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