Automakers confident of a swift recovery after unlock
NEW DELHI: Automakers expect a quick recovery in the sale of vehicles, especially in the passenger vehicle segment, once state governments start lifting restrictions imposed to contain the spread of coronavirus with a steady decline in Covid cases.
Top executives at leading vehicle manufacturers expect sales to start picking up from late June or July because of a good harvest of summer crops, which may lead to faster recovery in rural demand, pent-up demand over the past two months, good order books and a continued shift towards personal mobility.
Some executives also point at the recovery in economic activity in the third and fourth quarters of last year despite the stringent nationwide lockdown earlier in the year.
Mercedes Benz India expects a V-shaped recovery in business, but this is contingent on when the states lift restrictions, according to managing director and chief executive Martin Schwenk. Mercedes expects substantial growth over last year despite the second wave, Schwenk said.
“A lot of our customers, who are business people, did not have any visibility about recovery last year. Now, they know how businesses can come back and they have the experience (to turnaround their businesses). We have confidence in our customers and we have a good order book,” added Schwenk.
Maruti Suzuki India Ltd, Hero Motocorp Ltd, Hyundai Motor India Ltd and others have either stopped production or reduced output significantly.
Despite the lockdown in states, some automakers have resumed production, though with single shifts, from midmay, following a steady decline in Covid cases.
“Depending on how aggressively the vaccination programme advances in FY22, there is anticipation of a quick bounceback. That is the reason we have not looked at aggressively reducing inventory,” Rakesh Sharma, executive director, Bajaj Auto, told brokerages.
The two-wheeler industry is expected to witness slow recovery because of an increase in prices of vehicles as a result of the transition to BS-VI norms and a jump in international commodity prices.
The quicker recovery expected in rural areas will boost the sales of companies such as Mahindra and Mahindra and Maruti Suzuki India Ltd as their products get significant traction in rural and semi-urban markets.
Mahindra and Mahindra expects demand for tractors to recover from June as the lockdown is likely to be removed gradually in various states after a steep decline in Covid cases, said Rajesh Jejurikar, executive director, auto and farm sector, Mahindra and Mahindra.
“In auto, we might have to wait for a month or two before the demand comes back. Our conviction is that we will see a strong comeback of demand once the economy opens up,” Jejurikar said.
“The semiconductor issue has impacted certain models. Supply side issues are expected to continue with the localized lockdowns,” Jejurikar said.