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Ind-Ra Revises Indian Auto Sector Outlook for 2020-21

Auto News - Published on Wed, 12 Feb 2020

Image Source: Auto India
India Ratings and Research has revised the outlook on auto sector to negative from stable following weak sales expectations amid macroeconomic headwinds, leading to weak consumer sentiments. Furthermore, sector-specific factors such as an uncertain regulatory environment, limited credit availability and increased cost of ownership after Bharat Stage VI implementation will add to negative consumer sentiments, the rating agency said.

In terms of total domestic sales, Ind-Ra expects flat-to-low single-digit growth in FY21. It expects passenger vehicle sales to grow 2 per cent -4 per cent YoY, while commercial vehicle to fall at 5 per cent - 7 per cent YoY. The two-wheeler sales are projected to have a flat to 5 per cent YoY in FY21. During April-December 2019, sales volumes fell 16 per cent YoY. India Ratings and Research expects industry volumes in FY20 to decline by 12 per cent - 15 per cent YoY.

For FY'21, Ind-Ra expects limited rating movements in the sector and thus has maintained a stable rating outlook. The agency noted that revenue growth and margins will be subdued, and companies will continue to incur capex in view of ongoing regulatory changes, development of an electric vehicle platform and continued new product launches.

Contrary to general perception, Ind-Ra does not expect any meaningful pre-buying as OEMs have already started launching their BS-VI variants and reduced production of BS-IV variants, to manage inventory pile-up. "Pre-buying is likely to be more in two-wheeler and commercial vehicle, where price differential is higher, while it would be insignificant in passenger vehicle," the agency explained. After the adoption of BS-VI from 1 April 2020, the prices of vehicles would increase.

As consumers would take some time to accept the increased pricing, Ind-Ra believes sales in Q1 FY21 would be minuscule, especially in commercial vehicles. The demand is likely to pick up from the start of the festive season in 2HFY21, it added.

Source :

Posted By : Arun Huidrom on Wed, 12 Feb 2020
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