Business Environment May Remain Challenging This Fiscal, Says TVS

The first quarter of FY 2020-21 is expected to witness a sharp decline, and any upside will be possible only later in the year, according to TVS.

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TVS says first quarter of FY 2020-21 likely to witness sharp decline with recovery still some time away

Highlights

  • Economic fallout of COVID-19 to hit first quarter sales
  • Some recovery expected only towards the later part of the year
  • Overseas markets like Latin America to be impacted, Africa to see revival

The business environment will remain challenging in the current financial year due to the coronavirus pandemic, according to TVS Motor Company's annual report for 2019-20. In its annual report to the company's shareholders, TVS Motor Company says chances of some revival from the current downturn will be possible only in the later part of the year. According to the two-wheeler manufacturer, a good monsoon this year could lead to growth in the agriculture sector, which may help in reviving the two-wheeler industry.

"In 2020-21, the economy will see significant challenges owing to the impact of the COVID-19 pandemic and the resultant interruption to economic activity which is beginning to reopen," TVS said in its annual report.

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Also Read: TVS Announces Salary Cuts For Employees

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Recovery in two-wheeler market expected towards the later part of current financial year

Restriction on public mobility and impact on many sectors of the economy will affect gross domestic product (GDP), disposable incomes, consumer sentiment and also the auto industry, TVS said. According to TVS, a "very sharp decline" is expected in the first quarter of 2020-21, which may partially recover in the following quarter, with any possibilities of an upside only playing out in the later part of the year.

According to TVS, the economic slowdown is likely to impact the company's business, saying that consumers may like to conserve cash, in view of unforeseen events like potential job losses and salary cuts. This will lead to delay in purchase of all non-essential durables and may pose a risk to many industries in the manufacturing sector, including automobiles.

Also Read: TVS Posts 33 Per Cent Sales Decline In June 2020

"This may result in delayed recovery of the two-wheeler industry. This could lead to challenges in working capital management in the supply chain. The company is cognizant and is advising dealers and suppliers to make prudent choices in cost reduction and enhance working capital management, " TVS said.

Also Read: TVS Despatches Just 59,000 Units In May 2020

ffi0dcdkLatin American markets likely to take time to recover, but African markets expected to recover soon

The company however noted that economic activity and lifestyles will have to be rebuilt factoring in co-existence with COVID-19 with social distancing and work from home practices witnessing greater prevalence. And these long-term practices of social distancing could see consumer preferences change towards personal mobility, which could prove to provide some opportunity, especially to the two-wheeler industry.

Mentioning export shipments, TVS said the economic impact of COVID-19 is expected to be more pronounced in the markets of Latin America, whereas the African countries seem to be lesser impacted, and the core demand in these countries may return sooner.

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(With PTI inputs)

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