Fitch Solutions says slowdown in India auto sector to continue FY21

Fitch Solutions Macro Research today said the slowdown in India's automotive sector will continue throughout 2020-21 (Apr-Mar), and the current situation could be exacerbated by the coronavirus outbreak.

The report highlighted that coronavirus may impact India's automotive manufacturing industry, especially as its healthcare system is illequipped to deal with a large scale epidemic.

Furthermore, because China is one of India's largest supplier of automotive components, a slowdown in the supply of Chinese made components will lead to shortages here and could force automakers to slow or stop production.

China supplies India with 10-30% of its automotive components, and this could be two to three times higher when looking at India's electric vehicle segment, which highlights just how exposed India's automotive manufacturing industry is to the slowdown of vehicle Chinese component manufacturing, the report added.

On Tuesday, Pawan Goenka, managing director of Mahindra & Mahindra Ltd said the outbreak of coronavirus in Wuhan, which has stoked apprehensions across sectors, may have some impact on the company since certain automobile parts come in from China.

He further claimed that if some components do not come in by the end of the month, it will be a difficult to manufacture, transport and retail BS-IV compliant vehicles in just one month.

The affiliate of Fitch Ratings' also said the weakness in the automotive space will continue through the next financial year starting April as the government's Budget announced on Feb 1 for 202021 has failed to provide sufficient short-term supporting policies for the industry, which will see weakness in production, the report said.