Auto cos see some light at end of lockdown tunnel

Once the 21-day lockdown is lifted, which may happen in phases, those who have been contemplating purchasing a car may actually do it, said analysts. 

Thanks to social distancing norms and rising hygiene awareness, daily commuters may ditch public transport and shared mobility solutions like Ola and Uber. Many are likely to prefer the confines of a car over roughing it up in crowded public transport services such as a metro, local sub-urban trains and buses, they said. 

Automakers are bracing for a rough ride ahead. Auto sales, already in reverse gear in India owing to tepid sentiments and a slowing economy, got dented badly in March, with sales at top companies declining by more than 64 per cent over the year-ago period. 

But amid the lockdown, announced by the government to contain the spread of the coronavirus disease (Covid-19), there is a silver lining. Once the 21-day lockdown is lifted, which may happen in phases, those who have been contemplating purchasing a car may actually do it, said analysts. 

Thanks to social distancing norms and rising hygiene awareness, daily commuters may ditch public transport and shared mobility solutions like Ola and Uber. Many are likely to prefer the confines of a car over roughing it up in crowded public transport services such as a metro, local sub-urban trains and buses, they said. 

The trend may particularly boost entry-level and compact cars in the sub-Rs 10 lakh category. 

“While it’s a dark picture right now, there is a silver lining. You will see some pent-up demand, especially for entry-level cars. It’s an opportunity for all the automakers that play in the segment to gear up for it,” says Rajeev Pratap Singh, auto sector head at Deloitte. 

Many people who do not have a car are already actively considering buying one and with this, used cars will also get a boost, he added. 

“The risk of shared transport is very high and there will be a dip in demand for such services and shared mobility platforms,” said Singh. 

Rahul Mishra, principal and lead - automotive at Kearney, agrees. 

“The whole social distancing that we are practising is going to fundamentally alter some of the traditional ways of doing things. One such thing could be a preference for private mode of transport -- owning a vehicle instead of using shared public transport,” said Mishra. 

Millennials, who never thought of investing in cars as they preferred an Ola or Uber, may now think of owning a car. He also felt choices may be skewed towards small and compact cars. 

Automakers, that have their hands full dealing with the current crisis, are wary of any forecasts. 

R C Bhargava, chairman at car market leader Maruti Suzuki India, said: “We will have to see how the demand pans out after the lockdown is lifted. With no prior experience, saying anything will be highly speculative.” 

A top executive at another passenger vehicles firm echoed similar sentiments. 

“At this point, making any such prediction on a trend will be premature. We would rather do our bit by helping our channel and vendor partners. I am not sure if car purchase will top the priority of an average salaried class under the current circumstances.” 

Deloitte’s Singh said the challenge for automakers will be to manage the customer wisely. They will need to identify those who are looking to buy an additional car for the family. Given that the liquidity crunch will remain in the foreseeable future, companies will have to offer retail finance, he said.