Mumbai: The Covid-19 pandemic has come as a double whammy for India’s automobile sector, which is already reeling under recession for over a year now. According to Society of India Automobile Manufacturers (SIAM), passenger vehicle and two-wheeler vehicle sales, both, declined by 18 per cent in March-April 2020 as compared to the same period last year. But a recent survey offers a glimmer of hope to the automobile industry.
The report, Changing Gears: The impact of Covid-19 on the automobile industry, by carandbike.com, has forecast a possible V-shape recovery – a sharp economic decline followed by a quick and sustained recovery.
The report suggests that pent-up demand and first-time buyers could help the automobile sector rebound in the post-Covid era. Moreover, the survey also suggests a shift in the preferences, with consumers likely to go for a personal vehicle than travel by public transport.
The survey, conducted in April amid the coronavirus-induced lockdown, states that nearly 75 per cent of those surveyed were willing to buy a vehicle once the lockdown is lifted. In what could be music to the ears of manufacturers, 66 per cent of the enquirers were willing to purchase within 3 months of the end of the lockdown. It is this demand, the survey concludes, could help the sector in the post-Covid era.
Rise of private vehicles?
In the post-Covid era, the survey report suggests that preference for a private vehicle for daily commute could increase by 15 per cent. The rise in numbers, if it turns into reality, could be attributed to people above the age of 35, as over 60 per cent of those surveyed in that age group preferred to utilise private vehicles than travel by public transport.
“Social distancing will be major factor in the shift towards private vehicles in the post-Covid-19 world. In public transport systems across India, there is scant regard for social distancing. Plus, trains and buses are always overcrowded during peak hours. So, people out of fear of contracting the virus are likely to go for private vehicles,” said an automobile sector insider who wished to remain unnamed.
While social distancing has taken over the Indian psyche, the flip side to the increase in private cars is the rise in traffic and air pollution – both of which have become a sort of distant memory during the ongoing lockdown. In addition, with many state governments likely to increase the bus fare, it could further encourage people to prefer a private vehicle.
“There is understandable anxiety amongst a wide section of customers regarding hygiene and safety, which is driving the preference for private vehicles. The survey shows a huge swing in the preference – from the earlier 40 per cent to 55 per cent,” said Ashutosh Panday, CEO and MD, Mahindra First Choice Wheels Ltd.
Used cars could be game-changers
Pre-owned cars could be the flavour of the post-Covid-19 world. The survey noticed that the enquiries regarding used cars doubled during the lockdown period. In fact, the consumer sentiment seemed stronger among those who enquired about used cars – 77 per cent of them were willing to go ahead with their purchase after the lockdown.
It is easy to guess the main reason behind the popularity of pre-owned vehicles – lower prices. A recent survey by Cars24 validates the reason. It found that a considerable percentage of the respondents preferred to buy old cars due to financial constraints. According to industry insiders, there was a 10 per cent rise in the sale of used cars in FY2020.
“The pre-owned segment might benefit more because people moving from public transport to private vehicle are not very well to do to begin with,” the unnamed insider noted. With the Indian economy facing stagnation since over a year and the Covid-19 lockdown only likely to worsen the financial constraint of the middle-class, used cars could end up becoming the ‘go-to’ choice.
EVs - The way ahead?
With “environment-friendly” becoming the buzzword of late, the prospects of Electric Vehicles cannot be ruled out completely. While several critical issues – charging points for such cars, their repair and maintenance, and high price – remain, India has already embarked on an ambitious mission to become 'electric car friendly'.
According to the 2013 National Electric Mobility Mission Plan, the government wanted six to seven million electric and hybrid cars on the roads by 2020. The Narendra Modi government took this idea further by wowing to allow only electric cars by 2030.
“The EV segment is already growing in India. After the lockdown, there is a strong scope for EVs,” the unnamed insider said. In the post-Covid-19 world, automobile giants are likely to continue marketing their EVs as “green mobility”, spelling out the environmental benefits of owning such a car.
Their enthusiasm is backed by some solid sales figures: In FY 2019-20, electric vehicles sales, excluding e-rickshaws, grew by 20 per cent at 1.56 lakh units, driven mainly by two-wheelers.
As far as the total picture is concerned, the automobile sector is likely to not face a demand problem but a probable supply problem. The unnamed industry insider said that the companies building the vehicles would face a manpower crunch as thousands have returned home during the lockdown. This could lead to long waiting periods for people to fulfill their dream to own a car.