Car sales to stabilise in 2020 due to stimulus measures, discounts: Moody’s

Car sales in India are expected to be relatively flat this year after plunging 11.8 per cent in 2019 amid slowing economic growth, as per Moody’s Investors Service.

The rating agency also lowered its global sales forecast as the coronavirus outbreak reduces demand and disrupts automotive supply chains.

“We expect Indian auto sales to rise 0.5 per cent in 2020, supported by stimulus measures, discounts on new cars that do not comply with Bharat Stage VI (BS VI) emission norms, which will take effect in April,” the ratings agency said in a statement. But weak consumer demand and tight liquidity will likely limit any improvement in car sales this year, it added.

“In 2021, we expect Indian car sales to rise 2 per cent,” Moody’s Investors Service said.

Global auto sales to fall

Commenting on global auto sales, it said, “We expect global auto unit sales to decline 2.5 per cent in 2020, narrowing from a 4.6 per cent drop in 2019, but worsening from the 0.9 per cent decline that we had previously projected for this year.”

The ratings agency expects sales to rebound only modestly in 2021 with growth of 1.5 per cent. “Our outlook on the sector remains negative,” Moody’s Investors Service said.

It further noted, “We would consider returning to a stable outlook if we were to expect global light vehicle sales growth to recover to at least 1 per cent over the next 12 to 18 months. A stable outlook would also require improving pricing and at least stable capacity utilisation.”

Coronavirus impact

Moody’s also predicted auto sales decline in China. “In the wake of the coronavirus outbreak, we expect auto sales in China, which includes both passenger vehicles and commercial vehicles, to fall 2.9 per cent this year, a meaningfully weaker performance than the 1 per cent growth we had previously projected,” Moody’s said.

Elaborating on the market, it said that cautious consumers are steering clear of crowded areas, including auto dealerships, while corporate demand for vehicles is weakening as broader economic uncertainties cause companies to scale back capital spending.

“Work stoppages and lower production levels because of government-mandated business days off, the reduced flow of migrant workers across China and disruptions in auto-parts supply chains have lowered production levels,” it added.

“As a result of these factors, we expect auto sales to decline significantly year-over-year in February and March, with automakers likely to claw back only about half of the lost sales during the balance of the year. We expect Chinese auto sales to swing back to growth in 2021, with a rebound of about 2.5 per cent,” it further said.