Covid 2.0: Few green shoots for auto in rural belt | Economic Times

The automotive industry is growing less optimistic about a repeat of the quick turnaround the market witnessed after the lockdown last year.Rural markets — that account for 30-50% of automobile sales — had remained largely unaffected by the first wave of the pandemic last year, driving sales even before the cities recovered. That has changed, as rural India, too, is devastated in the second wave. The agriculture sector that drives the rural economy is buoyant, with the government estimating record foodgrain production this year, but consumer sentiment has taken a hit. People are expected to be more risk-averse this time and spend less on discretionary purchases like vehicles.82962249“Rural markets started showing signs of weakness from the second fortnight of April,” said Shashank Srivastava, senior executive director, Maruti Suzuki. “As for car purchase, sentiment plays a disproportionate role.”According to SBI Research, rural districts account for 48.5% of Covid-19 infections this month, compared with 36.8% in March. With the infection rate also in the 30-40% range in many of these districts, industry experts predicting a quick recovery in demand once states eased lockdowns, now say it could take at least three or four months, that too depending on the pandemic situation.“Fear has gripped people — with worry and fear, there is always a tendency to hold back purchases,” said Ramesh Iyer, managing director of Mahindra & Mahindra Financial Services, one of the largest rural automobile financiers. “The impact was seen in the second half of April and early May, with average volumes dropping 15-20%. With lockdown measures, access to dealerships and banks is also difficult; this will lead to deferral in purchases for a quarter.”Rural districts in the Hindi-speaking states, a big market for motorcycle makers, are among the worst-hit. A dealer of a leading motorcycle maker in Uttar Pradesh’s Rampur district said a surge in fatality rate had shaken confidence, and people were likely to park more money in their savings pool for a longer time to deal with any medical emergency.Bajaj Auto executive director Rakesh Sharma said the situation needed to be viewed cluster-wise, instead as rural or urban. “The demand pattern for recovery or growth will be cluster-based and depend entirely on how the pandemic recedes and how strongly the vaccination programme advances in each cluster of markets,” he added.Maruti’s Srivastava expects the market to post a strong recovery once the lockdown situation eases. Iyer of Mahindra Financial predicts demand to bounce back ahead of the festive season. Shailesh Chandra, president of the passenger vehicle division at Tata Motors, said rural sentiment would be “more volatile” than that in cities in the short term.