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Indian auto companies May sales cowed down by COVID-19

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Following a blank slate with nil sales in April, Indian auto companies continued to report slump in monthly sales in May.

The country’s largest car maker Maruti Suzuki reported 86.2 percent decline in total sales at 18,539 units in May compared to 1,34,641 units in the same month last year.

Another Indian auto manufacturer, Mahindra too reported a 79 percent decline in total sales to 9,560 units compared to 45,421 units in the same month last year.

“Our performance during May has been muted, due to the challenges the industry is facing. We have opened 70 percent of our dealerships and retail sales have begun,” said Veejay Nakra, Chief Executive Officer, Automotive Division, Mahindra & Mahindra.

Both Maruti and Mahindra reported export sales of 4,651 and 484 units respectively during the month under review, down 48 percent and 80 percent respectively.

India‘s auto vehicle exports are mainly directed towards Asia, Africa and Latin America, with two-wheelers, passenger vehicles and three-wheelers accounting for bulk of the volumes, with high growth in the past two-three years and but are now showing symptoms of a down-turn due to COVID-19.

“We expect demand for vehicles in these export markets to fall substantially in 2020. As per IMF (International Monetary Fund), many of these export countries are likely to witness GDP decline in 2020, due to the impact of COVID-19. The impact may be higher in case of oil-exporting nations such as Nigeria, due to fall in oil price. Depreciation of currencies of these export markets may end up inflating prices of imported vehicles,” said Joseph George, auto analyst with India Infoline, a domestic stock brokerage house.

Around 55-60 percent of the auto-dealers have reopened their showroom after relaxation, but the retail sales are merely 10-12 percent of the normal level. Walk-ins and enquires are low, people are cautious and deferring their discretionary purchases, said Abhishek Jain, Dolat Capital, another domestic brokerage in his report on the sentiment prevailing with the domestic auto-dealers

Indian automotive industry employs 37 million people and contributes to 15 percent of indirect tax in the form of Goods and Service Tax of close to 20 billion United States dollars.

However, the sector is already facing unprecedented challenge after sales growth declined by 18 percent last year and could see between 22-35 percent decline in various auto segment this year, according to Society of Indian Automobile Manufacturers.

(XINHUA)

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