11 C
Delhi
Friday, December 4, 2020

India’s automakers’ profitability to remain weak: Fitch Ratings

- Advertisement -

Difficult road ahead for auto industry with BS-VI: SIAMMumbai, June 24 (IANS) Credit rating agency Fitch Ratings expects Indian automakers” profitability to remain weak as the pandemic”s economic impact will weigh on demand in FY21.

India”s automakers reported sharper volume declines and weaker profitability in the last quarter of the financial year ended March 31, 2020 (4QFY20) than in the earlier quarter.

The rating agency cited factors such as slowing GDP growth and weak consumer sentiment to have reduced volumes and led to higher discounts by automakers.

Fitch said the implementation of BS6 – a more stringent emission framework – in April 2020 will increase production costs.

“Sales in all key auto categories fell sharply in 4QFY20 from 3QFY20 when discounts offered by automakers during the festive season helped to slow the downtrend in sales that started in the beginning of 2019,” Fitch said in a statement.

“Auto sales were affected by weak consumer sentiment as quarterly GDP growth slowed over FY20 and buyers” preference to wait for newer, BS6-compliant models.”

According to the Society of Indian Automobile Manufacturers, domestic sales volume of passenger vehicles fell by 22 per cent YoY in 4QFY20, compared to a decline of 1 per cent in 3QFY20.

READ ALSO:  Set up nodal agencies to restore water bodies: NGT asks states, UTs

“Fitch expects India”s real GDP to decline by 5 per cent in FY21 following multiple extensions of stringent lockdown measures in the country since the last week of March 2020,” the statement said.

“Automakers reported zero sales volumes in April and yoy declines of more than 75 per cent in May because of weaker demand as well as production disruption due to plant closures, supply chain disruption and the lack of labour availability.”

As per the statement, volumes are expected to partly recover in the second half of FY21 as sales gradually increase after the easing of lockdown measures since May.

However, overall volumes could decline by more than 20 per cent in FY21 as customers choose to delay spending on big-ticket discretionary items amid a weak economic outlook and due to higher prices with BS6.

In particular, Fitch expects a sharper decline in the sales of medium and heavy commercial vehicles because of lower levels of private investment, weak mining activity amid subdued commodity prices, and fewer new infrastructure projects.

“In comparison, the decline in two wheeler volumes could be smaller because rural consumers will be less affected by the recession, while they had a good harvest and better pricing dynamics in the last crop season and expect a normal monsoon in the current season,” the statement said.

READ ALSO:  Start-ups can now sell products on Government eMarketplace

“Better farm economics have supported India”s tractor sales, which fell by a smaller 10 per cent in FY20 compared with other vehicle types.”

Besides, it said that sales volume will have a larger impact on automakers” profitability as they have a significant quantum of fixed expenses when compared to operating margins.

“Weak demand could also lead to more aggressive pricing by automakers despite the higher cost of production under BS6, which could offset savings from lower commodity prices,” the statement said.

“Automakers will also face significant working capital-related cash flow mismatches in 1QFY21, as sales receipts dwindle in line with weak volumes, but they continue to make payments to suppliers – which are typically smaller entities with limited financial flexibility. However, we do not expect the larger automakers to experience major liquidity issues, given their low leverage and ample financial flexibility.”

–IANS

India Updates
India Updates is an independent news & Information website. Follow us for regular updates on News and Information.

Follow Us On

Related News

Hackers targeting Covid-19 vaccine cold chain, warns IBM

San Francisco, Dec 3 (IANS) Tech giant IBM on Thursday said its team has uncovered a global phishing campaign targeting organisations associated with a...

Millions of bad bots attacks on e-commerce sites detected

New Delhi, Dec 3 (IANS) Amid the online shopping spree during the holiday season, security researchers with Barracuda Networks, a leading provider of cloud-enabled security...

Facebook to remove fake claims about Covid vaccines

San Francisco, Dec 3 (IANS) Facebook on Thursday announced to step up its fight against the misinformation about Covid-19 vaccines, saying it will remove...

India has $109bn opportunity in PCBA export: Report

New Delhi, Dec 3 (IANS) India has the potential of becoming a $109 billion global manufacturing and export hub for Printed Circuit Board Assembly (PCBA)...

India may take oil from Iran, Venezuela again under new US admin

New Delhi, Dec 3 (IANS) India may pursue a case for resumption of oil supplies from sanction-hit Iran and Venezuela once the Joe Biden...

India’s aviation industry’s expected FY21 net loss at Rs 210 bn: ICRA

New Delhi, Dec 3 (IANS) India's aviation industry is expected to report a net loss of Rs 210 billion in FY21, credit rating agency...

Trending Topics In India

Covid 19 India Updates

What does the PM stand by: Rahul quizzes govt over Covid vaccination

New Delhi, Dec 3 (IANS) Former Congress Chief Rahul Gandhi took a swipe at the Centre by highlighting the differing stance of the BJP...

What does the PM stand by: Rahul quizzes govt over Covid vaccination

New Delhi, Dec 3 (IANS) Former Congress Chief Rahul Gandhi took a swipe at the Centre by highlighting the differing stance of the BJP...

Amarinder to take first Covid-19 vaccine shot in Punjab

Chandigarh, Dec 2 (IANS) With the Covid-19 vaccine in the final stages of operationalisation in India, Chief Minister Amarinder Singh on Wednesday said he...

May vaccinate those infected with Covid or having its antibodies: Govt

New Delhi, Dec 1 (IANS) The Union Health Ministry hinted on Tuesday that the people infected with Covid-19 or those who have recovered and...

Centre: homeopathic drugs permitted as add-on treatment in Covid; SC says will clarify

New Delhi, Dec 1 (IANS) The Centre on Tuesday informed the Supreme Court that Ministry of Ayush has permitted the homeopathic medical practitioners to...

Vaccine will not be released for mass use unless proven immunogenic: Serum Institute

Chennai, Dec 1 (IANS) Vaccine development company Serum Institute, India on Tuesday said the Covidshield vaccine will not be released for mass use unless...

Trending News In India

India has $109bn opportunity in PCBA export: Report

New Delhi, Dec 3 (IANS) India has the potential of becoming a $109 billion global manufacturing and export hub for Printed Circuit Board Assembly (PCBA)...

Millions of bad bots attacks on e-commerce sites detected

New Delhi, Dec 3 (IANS) Amid the online shopping spree during the holiday season, security researchers with Barracuda Networks, a leading provider of cloud-enabled security...

Facebook to remove fake claims about Covid vaccines

San Francisco, Dec 3 (IANS) Facebook on Thursday announced to step up its fight against the misinformation about Covid-19 vaccines, saying it will remove...

India has $109bn opportunity in PCBA export: Report

New Delhi, Dec 3 (IANS) India has the potential of becoming a $109 billion global manufacturing and export hub for Printed Circuit Board Assembly (PCBA)...

India may take oil from Iran, Venezuela again under new US admin

New Delhi, Dec 3 (IANS) India may pursue a case for resumption of oil supplies from sanction-hit Iran and Venezuela once the Joe Biden...

India’s aviation industry’s expected FY21 net loss at Rs 210 bn: ICRA

New Delhi, Dec 3 (IANS) India's aviation industry is expected to report a net loss of Rs 210 billion in FY21, credit rating agency...

Trending Showbiz

Yogi promises world class film city, opens doors for investment

Mumbai/Lucknow, Dec 2 (IANS) Uttar Pradesh Chief Minister Yogi Adityanath said on Wednesday that the proposed film city in Noida would offer ‘world class’ facilities to the entertainment...

Lionsgate Play arrives in India to take on Netflix, Amazon Prime

New Delhi, Dec 2 (IANS) Starz, one of the leading premium global streaming platforms, on Wednesday launched its independent direct to consumer over-the-top (OTT) app...

Hansal Mehta decodes why sports-based films do well

New Delhi, Nov 30 (IANS) Filmmaker Hansal Mehta, who is currently riding high on the success of his new sports drama Chhalaang, has revealed...

Babuji left me his life and works, says Amitabh Bachchan

Mumbai, Nov 30 (IANS): Iconic actor Amitabh Bachchan says his life and work is nothing compared to the legacy of his father and late eminent...

Trending Sports

FIH allocates quotas for 2022 and 2023 World Cups

Lausanne (Switzerland), Dec 3 (IANS) The International Hockey Federation (FIH) on Thursday allocated quotas for the 2022 women’s World Cup and the 2023 men’s...

Indian team can now compete against ‘high-profile opponents’: Ashalata

New Delhi, Dec 2 (IANS): India captain Ashalata Devi feels women's football in the country has come a long way forward where they can compete...

India 6th on Super League table, Australia climb to top

Canberra, Dec 2 (IANS) Australia jumped to the top of the ICC Men’s Cricket World Cup Super League points table after their 2-1 win...

Pandya, Jadeja power India to 13-run win, avoid whitewash

Canberra, Dec 2 (IANS) India, riding on a 150-run partnership between Hardik Pandya and Ravindra Jadeja for the sixth wicket and a three-wicket haul...

Michael Schumacher’s son Mick to race F1 for Haas in 2021

New Delhi, Dec 2 (IANS) The Schumacher name will make a racing return to Formula One next year as Mick Schumacher -- son of...

Bowlers found difficult to adapt from T20 to 50-over format: Iyer

Canberra, Dec 1 (IANS) Middle-order batsman Shreyas Iyer has admitted that the Indian bowlers have struggled to adapt to the 50-over format from the...

Latest Trending News In India

Hackers targeting Covid-19 vaccine cold chain, warns IBM

San Francisco, Dec 3 (IANS) Tech giant IBM on Thursday said its team has uncovered a global phishing campaign targeting organisations associated with a...

Millions of bad bots attacks on e-commerce sites detected

New Delhi, Dec 3 (IANS) Amid the online shopping spree during the holiday season, security researchers with Barracuda Networks, a leading provider of cloud-enabled security...

Facebook to remove fake claims about Covid vaccines

San Francisco, Dec 3 (IANS) Facebook on Thursday announced to step up its fight against the misinformation about Covid-19 vaccines, saying it will remove...

India has $109bn opportunity in PCBA export: Report

New Delhi, Dec 3 (IANS) India has the potential of becoming a $109 billion global manufacturing and export hub for Printed Circuit Board Assembly (PCBA)...

India may take oil from Iran, Venezuela again under new US admin

New Delhi, Dec 3 (IANS) India may pursue a case for resumption of oil supplies from sanction-hit Iran and Venezuela once the Joe Biden...