The consulting firm said that while sales of passenger vehicles are expected to show better growth post recovery in demand compared to two-wheelers and commercial vehicles, customers' preference for personal mode of transport will have a significant impact. Demand is expected to remain low because of job losses and pay cuts as coronavirus is putting a strain on the economy, the report said.
Consumers might prefer one segment of vehicles, one variant lower. The two-wheeler segment, where the informal sector is a key buyer, is expected to be significantly affected by the downturn. On the other hand, the commercial vehicle segment is likely to show delayed recovery because the segment is already impacted by excess capacity due to revised axle load norms and lower freight volumes due to weak economy. Furthermore, with continued logistics disruptions in hot zones, customers might not get in investment mode, the report said.
The current economic downturn might also lead automakers to defer product launches to after October. The companies may also give high discounts and not pass the entire cost accrued on account of Bharat Stage-VI emission norms to push sales. Impact of COVID-19 along with new environmental and safety regulations will likely dampen demand for new vehicles. An increasing number of buyers might choose to defer their new car purchase or go for pre-owned vehicles, the report said.
The report further stated that recovery in the rural market may take some time because of loss of income in farm, informal sectors, migrant wage losses, and low cash reserves and limited liquidity support from banks and non-bank finance companies.