Fitch forecasts 20% decline in domestic automobile demand in this fiscal

MUMBAI: International rating agency Fitch has forecasted over 20 per cent decline in domestic automobile demand during this fiscal year as the industr y faces several challenges and not just pandemic driven issues.

Attributing the marginal improvement in July volumes to pent-up demand following easing of lockdown restrictions, Fitch said the problems facing the auto industr y remains unabated.

"The domestic auto demand continues to face several challenges and we forecast the overall industr y volume declining by more than 20 per cent this fiscal year. This forecast could be revised down if the extent and the magnitude of the pandemic are worse than we expect," Fitch said in a report on Tuesday.

The economic fallout from the pandemic has exacerbated the weak consumer sentiment that was dampened by higher cost of ownership under BS-VI emission standards adopted from this April.

This is likely to constrain demand from first-time carbuyers as well as upgraders, despite their preference for private transportation due to hygiene reasons, the report said.Likely curtailment in private and public investments will weigh on demand for commercial vehicles (CVs), particularly medium and heavy commercial vehicles which are used in more cyclical end-markets. The pandemic has also reduced availability of financing as lenders exercise caution, particularly to weaker borrowers.