Covid hit Indian Auto sector

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As Covid-19 continues to ravage the country and a lock-down-like restrictions imposed in the majority of the states, the automobile sector seems to be worried. Given the current scenario, whatever green shoots began appearing after the first wave, may not survive for long. A top BPCL official informed, “Fuel sales in April have plummeted, with the overall demand at the end of the month falling by 7 percent.” Data released by state-owned retailers also show petrol sales suffering a dip since August last year. The sale of automobiles has also faced a major disruption, particularly in the passenger car segment. Major carmakers including Maruti Suzuki and Toyota, as well as two-wheeler brands like Hero and Honda, have already announced a suspension of production at their plants in view of the second wave of infection.

The global energy consultants Rystad Energy has also lowered India’s refined products demand estimate and forecast a drop to 2.8 million BPD in May 2021. Mobility restrictions in many states have reduced traffic in India to 78 percent of pre-pandemic levels, prompting a revision of the Indian refined products demand. Consequently, this has led to revision of India’s refinery runs down to 4.2 million BPD during May, a 600000-BPD monthly decrease from its own previous forecast. Despite major refiners planning to delay seasonal maintenance, the refineries are expected to reduce throughput to absorb the drop in domestic road fuel demand. With the virus spreading faster than ever, the entire country is either under total or partial lockdown. This has led to less usage of vehicles and thereby a dip in the demand of people wanting to buy new cars or motorcycles.

The current mood of the nation is also not right. Surveys have shown how one’s surroundings plays an important role in one’s decision of upgrading or buying a new vehicle. In fact, the steep rise of Covid-19 infections in India and the continuously worsening situation in the country has prompted Rystad Energy to significantly downgrade its short-term global liquids demand estimate. Rystad said that with India’s backstep coinciding with OPEC+ bringing back much of its curtailed oil output, the demand loss from one of the world’s largest oil consumers will result in a global oil liquids supply surplus of 0.9 million BPD in April and 1.4 million BPD in May 2021. The first wave was somehow absorbed by the automobile sector and post the announcements of unlock it also did show a promising restart. But the second wave that has hit the nation badly, is once again posing a threat for the sector for its sustenance.

 

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