Likely curtailment in private and public investments will weigh on demand for commercial vehicles (CVs), particularly medium and heavy commercial vehicles (MHCV), which are used in more cyclical end-markets.
The pandemic has also reduced the availability of financing as lenders exercise caution, particularly to weaker borrowers that form a significant customer base for CVs.
Monthly sales volume particularly in passenger vehicles (PV) improved markedly in July, benefitting from gradual easing in the government's stringent lockdown measures that were imposed in last week of March. Nonetheless, PV volume remained lower on a year-on-year basis.
Domestic sales volume of PVs increased by 73 per cent in July from June and that of two wheeled vehicles rose by 26 per cent. However, the volume of PVs was 4 per cent lower and that of two wheeled vehicles was 15 per cent lower, although the declines were much smaller than the 50 per cent and 39 per cent respectively in June.
Within PV, sales of utility vehicles increased by 14 per cent in July following a 31 per cent decline in June, underscoring the shift in consumer preference towards compact utility vehicles, said Fitch.
CV volume continued to fall more sharply in July compared with PVs, with continued weakness in MHCVs. Ashok Leyland, a leading manufacturer of MHCVs in India, reported a 75 per cent decline in domestic MHCV volumes in July following a decline of more than 90 per cent in Q1 FY21 for both Ashok Leyland and the broader industry.
Sales volumes of light commercial vehicles (LCV) fared better with Mahindra & Mahindra reporting sales fell by 16 per cent in July compared with decline of 69 per cent for M & M and 80 per cent for the broader LCV industry in Q1 FY21.
The sharp volume declines reduced revenue and resulted in operating losses for most Indian automakers in Q1 FY21. Nonetheless, cost-saving efforts by companies, including Maruti Suzuki, M & M and Ashok Leyland, helped to reduce operating losses.
Hero Motocorp, one of the leading manufacturers of two wheeled vehicles, reported marginally positive operating profit on back of cost savings and lower operating leverage in its two-wheeler business.
M & M's domestic auto volumes dropped by 78 per cent in Q1 FY21 but a smaller 22 per cent fall in tractor sales and higher margins helped to limit the deterioration in overall operating margins.
Tata Motors's PV and CV volumes in India fell by 61 per cent and 90 per cent respectively in Q1 FY21, leading to an operating loss at the standalone level despite cost-cutting initiatives.
The loss and working-capital mismatch due to production and sales disruptions caused cash burn in excess of Rs 4,000 crore during Q1 FY21 but the company's efforts to conserve cash by reducing investments and securing Rs 4,000 crore of debt helped to marginally improve its liquidity buffer at standalone level compared with March.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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