The contribution of the automotive sector to GDP may fall to 7% in this fiscal year: Acuite Ratings

NEW DELHI: India automotive section The contribution of GDP to the current tax can be reduced to 7 percent from 7.5 percent in 2018-19, and the overall revenue of original equipment manufacturers (OEMs) is expected to fall to 6 percent in 2019 -20, according to a study. According to Acuite Ratings&Research, total domestic sales of the automotive industry, including passenger vehicles, commercial vehicles, two-wheelers and three-wheelers, were expected to decrease between 6 and 7 percent this fiscal year compared to 2018 -19. 25 million units

It also expects sector revenues to decrease 5-6 percent year-on-year (year to year) to Rs 3-3.2 billion compared to Rs 3.35 billion in 2018-19.

In the second quarter (July-September) of this prosecutor itself, the rating firm expects OEM revenues to decrease by 23-25 ​​percent to Rs 0.6 billion compared to 0.8 billion in the same fiscal period. above, which leads to the contribution of the sector to the Gross The addition of value (VAB) of the country will decrease, which will affect its overall contribution to GDP.

As recent as 2018-19, the sector had reached a size equivalent to 7.5 percent. We assess that this number is likely to decrease to 7 percent in 2019-20, Acuite Ratings&Research said.

The understanding is influenced by the fact that the sector follows the push model, in which OEMs drive the entire automotive ecosystem, he added.

Consequently, any decrease in revenues and sales of these entities will also directly affect the auxiliary players and car dealers, the study said.

According to the government's automotive mission plan, the sector's contribution is expected to reach 12 percent by 2026.

Similarly, the continuously weak feeling among consumers may not provide a respite even during the holiday season and general sales of the automotive industry are expected to remain below similar periods in the past, the study said.

Recent trends in retail sales indicate that despite the high discounts and offers, the main players in the industry have failed to attract buyers to buy vehicles, even at the beginning of the festival season, according to the report.

Weak rural demand is one of the main reasons for the slowdown in the sector, he added.

In the future, the postponement of the purchase decision is anticipated in the second half of the current tax before the transition to BS VI emission standards, the study said.