Home >Industry >Manufacturing >Automakers worry about slow recovery in demand in urban India

NEW DELHI: India’s passenger vehicle and two-wheeler manufacturers are concerned that a delayed recovery in demand in the urban markets might lead to a prolonged slowdown in the industry.

Post lifting of the nationwide lockdown, rural and semi urban markets have been driving recovery in sales as the impact of covid-19 pandemic was limited in these areas.

According to industry executives and analysts, around 70% of demand for cars, utility vehicles, scooters and premium motorcycles (150 cc and above) comes from urban pockets especially the top 20 cities which are most affected by covid-19 pandemic.

Volume drivers and high margin products like compact and mid-sports utility vehicles and sedans are mostly dependent on the urban market for bulk of the demand. Hence, sales of such products need to pick up for automakers to witness an improvement in their financials.

“There is a 20% swing between the urban and rural markets and this highlights how strongly rural demand has come up. However, the big growth for cars has to come from the cities because that’s where the basic demand lies," said Tarun Garg, director, sales and marketing, Hyundai Motor India Ltd.

According to Avik Chattopadhyay, founder, Expereal, the surge in demand in the rural market is a temporary phenomenon based on factors like pent up demand of two-three months of lockdown, good and timely earnings from the rabi crop.

“The passenger vehicle market in India rests in the urban market and will continue to do so for at least a decade more.The revival of the PV market will happen only when the general consumer sentiment of the urban market improves. And that will be another 3-4 quarters after the blood has dried from the current carnage with jobs and salaries," added Chattopadhyay.

Vehicle manufacturers have been witnessing continuous decline in sales from the second half of FY 19 due to economic slowdown and increase in prices of vehicles as a result of transition to the new safety and Bharat Stage 6 emission norms. In FY 20 sales of vehicles fell in the range of 15% to 25% across categories after reporting low single digit growth in FY 19.

Post lockdown, vehicle sales especially of entry level cars and motorcycles, in the rural market picked up faster due to a healthy monsoon, good summer crop, government subsidies and less infections of covid -19. Hence, manufacturers expect rural areas to perform better than urban markets during the festival season.

Y S Guleria, director, sales and marketing, Honda Motorcycles and Scooter India Pvt Ltd, said a pick-up in urban demand is necessary for the industry to grow sustainably.

“Overall, rural demand is still lower than urban and that is the reason why sales of two-wheelers are still in the negative. Urban consumers buy a lot more two-wheelers. We have started to supply stocks to our dealers in the cities and with the increased economic activity in cities, need for personal mobility is also likely to increase which will lead to more sales of two-wheelers," said Guleria.

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