Bombay (Maharashtra) [India], Jun 12 (ANI): A milder economic impact from the second wave of the pandemic and resilient sentiment among buyers will support a rapid rebound in automobile demand in India after restrictions are eased, according to Fitch Ratings.
This is expected to result in double-digit growth in most segments in the fiscal year ending March 2022 (FY22) from a low base. Sales volume is expected to remain below the peak in fiscal 19.
“We believe less stringent restrictions and less disruption to business will limit the economic impact compared to last year. The decline in auto sales volume in 1Q FY22 versus 4T FY21 will be slower than the more than 70% decline in 1Q FY21, ”said Fitch.
Buyers are more bullish due to better visibility into a longer-term economic recovery and a reversal of wage cuts as business spending normalizes from 2020.
Fitch said agricultural fundamentals remain strong, despite the higher infection rate of the second wave in rural India compared to last year. This should also increase the availability of finance, despite the cautiousness of lenders.
“We expect the impact of the higher cost of ownership due to rising fuel prices and rising prices to be limited, except in the most vulnerable categories such as two-wheelers. Indian automakers’ margins will improve in FY22 on favorable operating leverage, while price increases will offset higher input prices.
Fitch said the global semiconductor shortage will have a limited incremental impact on Indian automakers, as the timing of its worst effects in the first quarter of fiscal 22 coincides with weak demand. The policy to encourage the scrapping of older vehicles is not expected to stimulate significant replacement demand, he added.
But new waves of infection could delay the expected recovery in auto sales. However, the drop in new infections in May limits the possibility of stricter or extended lockdowns at this time. (ANI)
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