2020 – once a cricket format, now a dreadful year!
The year that everyone just wants to DELETE! The year, when countries crumbled.
The Virus hasn’t spared anyone or any nation, irrespective of their size and might. As it wreaked havoc, economies kneeled before it.
We, at Market Xcel recently undertook an in-depth study of the various sectors of the Indian Economy to understand the implications of the world’s most hated virus. We interacted with end consumers and value chain members like the car OE distributors, stakeholders who represent industry associations to understand how each industry has fared, and is expected to perform in the immediate and short run.
India’s auto sector, which contributes more than 7% to the nation’s gross domestic product, grappled with a long-haul slowdown when the coronavirus lockdown stalled operations. After a complete washout in April, sales slowly revived in the subsequent months. According to the monthly vehicle registration data released by the Federation of Automobile Dealers Associations (FADA), the automotive retail sales went up by 11.66% in September 2020 over August 2020 sales.
- 13,44,866 units (2Ws, 3Ws, CVs, PVs and tractors) were sold in September across all segments
- Sales was down 10.24 % year-on-year
Most of the analysts and experts believe that the demand in September triggered on account of the following factors:
- Preference for own mode of transport due to fear of Covid infection.
- Low rate of interest offered by banks on car loans.
- Orders from the Govt and the public departments.
Segment Wise Sale Trends
3 wheelers: The demand for 3 wheelers is sluggish.
Small Cars/Low segment of cars: Sale is expected to boost on account of rational needs.
Mid- Segment Cars: The middle spectrum is not likely to see any upsurge as people do not have much liquidity at hands and the sentiment to spend is low. However, certain cars like ‘Creta’ have seen an upsurge on account of prior bookings, and also as many people wanted to buy the same for marriage season and during festivities.
Premium Segment Cars: The volume share for premium cars is very low in the total pie and is not expected to see a drastic high.
Commercial vehicles: No recovery seems in sight.
The inventories are fueled at dealerships which is also seen as trigger point for reporting of high numbers. The inventory levels as per the market feedback suggest that 2-wheeler inventory is around 45 days and 4 wheelers around 25 days.
Forecast For Automobiles
FADA anticipates a high growth period for sales during the festive season and the real scenario will emerge only when the festivities are over. Auto manufacturing is one of the core sectors of the economy that has bounced back in style. But whether the bounce is tangible –it is too early to say.
With sales clocking in Rs. 90,000 crore last year, it was expected for Consumer Durable and Appliances Industry to grow further in 2020. But hopes were shattered with an economic slowdown and Covid-19 onslaught. Despite all odds, Consumer Durables still grew by 10% in the first three quarters of 2020, as people continued to spend on consumer products like ACs, refrigerators, washing machines and other appliances.
Reasons for Growth
- People chose to perform household chores themselves, rather than hiring house help owing to safety and hygiene concerns.
- For most office goers, work from home + work at home meant double trouble. To manage and balance it out, they purchased appliances to make their lives easier.
- Affordability is another aspect driving the cause.
- Another aspect which is predominantly driving the sales is surge for goods across Government offices and ministries, to some extent sweet meat retailers and bigger corporates eyeing to buy gifts for the festivals.
- Unlike the previous times, consumer behavior shifted to more focused buying where budget is the foremost ruling denominator.
- Digitization of the Consumer Durables industry paved way for another means to earn higher profits. Few renowned firms which have basked in the glory of the sudden surge for goods are- Panasonic, Godrej, Lloyd and Philips.
Sectors like Oil and gas, cement and steel, FMCG have also started showing signs of recovery. However, the Apparel industry is still reeling under pressure. People are not buying clothes but the coming festivities might just give this sector a much needed push.
Industry officials are optimistic about higher sales during the approaching festival period and also due to the schemes of festive advance and LTC cash voucher scheme being issued for central government employees to buy goods with 12% GST or more.
The Big Question- Which Growth Route will the Indian Economy take?
The economic revival of India may take different routes. It could be U, V, K, W or Z and experts are divided over the shape of the growth curve. Many say it will be V shaped recovery, however a substantial number believe the recovery will be slow and gradual.