Covid-19, inventory correction before BSVI transition to reach automotive revenue in March quarter

MUMBAI: The coronavirus Outbreak and inventory correction prior to transition to BS-VI emission standards are expected to reduce aggregate revenue for some of the auto companies and auto auxiliaries by 26% in the March quarter, even when the weakness at Short-term demand is likely to continue as COVID -19 persists, a report said Monday.

Additionally, higher discounts and operating leverage are expected to reduce aggregate margins by 240 basis points year-over-year, Emkay Global financial services he said in his report on the car and automotive accessories.

Most of the manufacturing activities, including in the auto sector, are suspended since March 25 when the government implemented a 21-day lockdown to contain the spread of coronavirus.

States like Maharashtra, Punjab , Odisha, Telangana and west of bengal We have already announced the extension of the blockade until April 30.

Brief notices

Explore the writings

Aggregate revenue (in the March quarter) is likely to decline 26 percent year-over-year, due to the Covid-19 outbreak and inventory correction before the BS6 transition. The companies that are likely to post a sharp drop in revenue are deep cyclicals or companies with global ties, Emkay Global said.

The March quarter top line for the companies covered by the report is likely to be weak with a 28 percent year-over-year drop, he said, adding that the decline will be strong for deep cyclicals and companies with global ties.

The automakers included in their analysis are Tata Motors, M&M Ltd, Maruti Suzuki India, Hero MotoCorp , TVS Motors, Ashok Leyland, Bajaj Auto, Eicher Motors , Escorts and Atul Auto .

Apollo Tires, Amara raja, Exide, Motherson Sumi and Bharat Forge they were among the auxiliary manufacturers.

The report says it expects the rebound in sales to be faster in the passenger car, premium motorcycle and tractor segment.

Although the short-term weakness is expected to continue as the Covid-19 outbreak spreads, it is likely to gradually recover from H2FY21 led by low base, better rural sentiment, and pent-up demand. We believe that the recovery will be faster in PVs, premium motorcycles and tractors, Emkay Global said in the report.