No respite for automobile companies, budgetary sops notwithstanding
1 min read . Updated: 05 Feb 2019, 10:26 AM IST- Cyclical headwinds are particularly strong in passenger cars, heavy commercial vehicles and tractors, where the base is also very high
- Technological changes and liquidity issues among non-banking financial companies that were active channels of auto financing were additional headwinds
Hopes that January could see a revival in auto sales have crashed. The chart alongside shows that the trend of weak sales has continued in January, on the back of a dull festive season. FY19 year-to-date volume growth is in double-digits and looks decent, but the pace of growth is decelerating. A Jefferies India Pvt. Ltd report says that the upcycle seen in FY18 is showing signs of fatigue.
While budgetary sops to increase disposable income in rural and mid-income segments could drive demand for some segments such as two-wheelers, other factors need to ease, too. For instance, cost of ownership has risen with a higher insurance burden, and the income boost alone may not be sufficient to offset this. Technological changes and liquidity issues among non-banking financial companies that were active channels of auto financing were additional headwinds. Consequently, consumers have been deferring purchases.
Cyclical headwinds are particularly strong in passenger cars, heavy commercial vehicles and tractors, where the base is also very high.
The weak wholesale numbers mirror high inventory levels with auto dealers, which reinforces the cautious outlook on the sector.
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