Mumbai: A milder economic impact from the second wave of the pandemic and resilient buyer sentiment will support a rapid rebound in automotive demand in India after restrictions were eased, Fitch Ratings said.
This is expected to result in double-digit growth in most segments in the fiscal year ending March 2022 (FY22) from a low base, he said.
“We expect sales volume to remain below the peak in fiscal 19,” said Fitch.
“We believe that less stringent restrictions and less disruption to business will limit the economic impact compared to last year. 70% to 1QFY21. ”
Buyers are more bullish, Fitch said, due to better visibility into a longer-term economic recovery and a reversal of wage cuts as business spending normalizes from 2020.
“Fitch believes agricultural fundamentals remain strong, despite the higher infection rate of the second wave in rural India compared to last year. This should also increase the availability of finance, despite the cautiousness of lenders.
“We expect the impact of the higher cost of ownership due to rising fuel prices and rising prices to be limited, except in the most vulnerable categories such as two-wheelers. the increases will offset rising input prices.
In addition, he indicated that the global semiconductor shortage will have a limited incremental impact on Indian automakers, as the timing of its worst effects during 1QFY22 coincides with weak demand.
He also said India’s policy to encourage the scrapping of older vehicles is unlikely to stimulate significant replacement demand.
In addition, Fitch pointed out that the waves of infection could delay the expected recovery in auto sales.
“However, the drop in new infections in May 2021 limits the possibility of stricter or extended lockdowns at this time.”