Will Auto Sales revive?

With India beginning to unlock and wither its way from the pandemic, it is becoming increasingly clear that many industries have been hit and are currently struggling too. The auto industry would be one sector you could completely write off as it was already in a very sorry state to be with, but there has been a change in the market dynamics since. The automobile sector has picked off fuelled by the rise in demand in rural and semi-urban markets. 

Since the pandemic hit, public transportation has been frowned upon by the masses due to fear of contracting the virus. In many countries such as China, personal mobility has taken off, but it is still struggling due to the low purchasing power per capita in India. But the affordable segment of automobiles in India has boomed and we need to know why.

While disposal of cars from the company was impacted by lockdown restrictions and several urban dealership locations falling in containment zones, dealers in rural areas managed to liquidate their inventory, leading to higher retail sales,” said Shashank Srivastava, executive director, MSIL. He added that the company witnessed an increase in sales from smaller towns and rural areas, as most of the containment clusters are in urban areas. The primary sector of vehicles that are experiencing a boom in demand is entry-level hatchbacks.

Take, for instance, Maruti Suzuki, India’s largest automobile maker, has registered a jump in customer queries for entry-level hatchbacks such as Alto, S-Presso, WagonR and Celerio. It expects its sales to exceed even those of pre-COVID times. 

The timely arrival of the southwest monsoon, combined benefits of a record Rabi crop, government support for Agri initiatives and excellent progress in Kharif sowing has boosted the sentiments of the farmers in agriculture in India has seen 8% growth amidst the pandemic. With added revenues, the rural markets have also seen a rise in demand for tractors and agricultural equipment. Mahindra and Mahindra, India’s largest agricultural vehicles manufacturer, have increased numbers in the Agri vehicles segment. 

The way forward, Companies would like to encash this new surge in demand for as long as it lasts. Various companies have been trying to close deals with NBFCs to provide easy finance to the rural and semi-urban customers and boost demand. Production has to be ramped up to meet this rise in demand, but that is easier said than done. With most of the manufacturing facilities in Tamil Nadu where the unlock has yet to affect the plants and factories, Suzuki and other automobile players face a hard time ramping up the production. 

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