Companies

Economy will see significant challenges in 2020-21 due to Covid-19: TVS Motor

Mumbai | Updated on July 12, 2020 Published on July 12, 2020

The TVS Motor company’s pavilion during the Auto Expo in New Delhi (file photo)   -  REUTERS

The economy will face significant challenges this fiscal due to Covid-19 which will, in turn, impact the automobile industry, according to the TVS Motor Company.

“In 2020-21, the economy will see significant challenges owing to the impact of CoVID-19 pandemic and the resultant interruption to economic activity which is beginning to reopen. Economic activity and lifestyles will be rebuilt, factoring in coexistence with CoVID-19. Social Distancing (SD) and Work From Home (WFH) practices will see greater prevalence,” the company said in its annual report for 2019-20.

With the decrease in consumer’s purchasing power and restrictions on public mobility amid the pandemic, the automobile industry is likely to be negatively impacted this fiscal. The auto industry is likely to face a significant decline in the first quarter and may pick up later this year according to the report.

“The restriction on public mobility and impact on many sectors of the economy will affect GDP, disposable incomes, consumer sentiment and the auto industry as well. Consequently, a very sharp decline in the first quarter of 2020-21 is expected, which may partially alleviate in the following quarter, with any upside possibilities only playing out in the later part of the year,” it said.

Consumer sentiment

Consumer sentiment will be highly impacted due to job losses and salary cuts affecting the consumer sentiment towards purchasing non-essential durables. This may lead to a dip in domestic sales.

“The brunt of the adverse economic environment will be manifest in real contraction of disposable income and weak consumer sentiment. The severity of impact is also higher at the lower to mid income with customers who form bulk of the commuter 2W industry,” the report said.

“Consumers will conserve cash, in view of unforeseen events like potential job loss and salary cuts levels. This will lead to delay in purchase of all non-essential durables, and may pose a risk to many industries in the manufacturing sector including automobiles. This may result in delayed recovery of the 2W industry,” it said.

The pandemic will also impact exports as a lot of countries across the globe have also been severely impacted. Two-wheeler exports will witness a decline in the initial part of the year.

However, there’s a silver lining in the form of reduced dependency on public transport amid the pandemic which may increase the need for two-wheelers.

“Social distancing norms followed across the globe due to CoVID-19, could become the new normal. People may move away from use of shared/public transport solutions. This changed preference would lead to enhanced need for a personal mobility solution and could emerge as an area of opportunity for two-wheelers,” the company said.

Plans

Furthermore, TVS Motor is also optimistic about its acquisition of Norton Motorcycles in April this year.

"The company also believes that Norton Motorcycles can leverage its additional geographical network reach and global supply chain capabilities to expand to new markets and audiences with existing and upcoming products," it said.

TVS’ domestic sales of two-wheelers in 2019-20 amounted to 24.1 lakh units as compared to 31.4 lakh units sold in 2018-19.

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Published on July 12, 2020
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