Auto Industry Could Take 4 Years To Get Back On The Growth Trajectory; New Investments Unviable: SIAM

SIAM has projected a de-growth outlook of anywhere between 25 per cent - 45 per cent for FY2021 and cannot see the situation recovering anytime soon. This will also take a toll on further investments in new technologies.

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SIAM has projected a sales decline of 26 per cent - 45 per cent in FY 2021.

Highlights

  • SIAM has projected a sales decline of 26 - 45 per cent in FY 2021.
  • Auto sales are not expected to get on growth trajectory before 2024.
  • Investment in technologies and expansion plans will be impacted as well.

The unprecedented coronavirus crisis has taken a toll on almost every sector and the auto industry is one of them. With both production and sales coming to a halt in April, the very first month of FY2021, auto sales in Q1 FY2021 slumped by 75.49 per cent selling 14,91,216 units as compared to 60,84,478 units in the same period last year. What's even worse is that the Indian auto sector regulatory body- SIAM has projected a de-growth outlook of anywhere between 25 per cent and 45 per cent for FY2021 as it cannot see the situation recovering anytime soon.

Also Read: Car Sales June 2020: Passenger Vehicle Sales Slump By 49.59 Per Cent

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The auto industry has been gripped by the prolonged slowdown for nine quarters now.

The Society of Indian Automobile Manufacturers (SIAM) is not expecting auto sales to recover and get on a growth trajectory before 2024, taking 2018 as the base year. Rajan Wadhera, President- SIAM said, "The industry was already hit by the prolonged slowdown and the coronavirus crisis has made things even worse as we could only expect getting back to normalcy before 3 to 4 years which is by 2024."

Passenger vehicle sales recorded single digit growth of 5.32 per cent at 33,93,705 units in CY 2018 when compared to 32,22,220 units in the calendar year 2017.

Also Read: Strong Sales In Rural Markets Drive Recovery Of Auto Industry Post Lockdown

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The auto industry had incurred a high investment cost of an estimated Rs, 90,000 crore for the transition to BS6.

The timing of the crisis couldn't have been worse for the auto industry which made its leap from BS4 to BS6 emission norms in April this year and the industry had incurred a high investment cost  estimated at ₹  90,000 crore. Even recovery of the invested amount is difficult in the short term now while return-on-investment seems a farfetched. This will prove to be deterrent for further investments in new technologies like advanced hybrid vehicles, electric vehicles and EV infrastructure among others.

Also Read: Car Sales June 2020: Maruti Suzuki Alto Regains Top Spot; Hyundai Creta Bags Second Place

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Investment in new technologies will also be impacted in these challenging times.

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Sales of passenger vehicles have recorded a drastic drop of 78.43 per cent at 153,734 units as compared to 712,684 units in the same period a year ago. Sales of two-wheelers went down by 74.21 per cent at 12,93,113 units as compared to 50,13,067 units sold a year ago. In June 2020, the passenger vehicle segment went down by 49.59 Per Cent in June 2020 selling 105,617 units as compared to 209,522 units sold in June last year while the sales of two-wheelers in the same month went down by 38.56 per cent at 10,13,431 units as compared to 16,49,475 units sold a year ago.

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