Mumbai: Total vehicle production, excluding commercial vehicles, fell 21% month-on-month in April, due to an 11% drop in passenger vehicle (PV) manufacturing and 23% of two-wheelers in the previous month, due to the second wave of the pandemic, a report said on Tuesday. In addition, production of three-wheelers fell 86% in April compared to March, amid lower demand in the domestic market, India Ratings (Ind-Ra) said in the report.

The rating agency said it believes the second wave of COVID-19 halted the momentum seen by the industry in the third and fourth quarters of 2020-2021. Many original equipment manufacturers (OEMs) have also advanced maintenance shutdowns through April and May due to weaker consumer sentiment, auto dealership closures, as well as restraints on the industry side. ‘offer, the report noted.

It is likely to have a negative impact on demand in rural and urban areas. However, expectations of strong macroeconomic growth, albeit on a lower basis in FY21, coupled with an average monsoon expectation and a good rabi harvest, could support demand for the sector in 2021-2022, added the report.

On the volume side, the domestic auto industry’s sales volume (excluding commercial vehicles) declined 30 percent in April, he said.

The agency added that annual figures are not comparable due to the nationwide lockdown in April 2020.

The decline in domestic sales volume was mainly due to the growing number of coronavirus infection cases, which led to state-level lockdowns going into effect in the latter part of the month.

PV and two-wheeler sales volumes fell 10 percent and 34 percent, respectively, in April; while three-wheeler sales volumes fell 57% amid a further reduction in preference for shared mobility, Ind-Ra said.

Nonetheless, export volumes continued the growth trend in April, which grew 19 percent from March, mainly led by 21 percent growth in two-wheeler exports, according to the report.

He said PV demand remained resilient in April, benefiting from increased consumer preference for personal mobility. The domestic photovoltaic market continues to experience a growing transition to utility vehicles (UV), which accounted for 42% of national PV sales compared to 30% in April 2019, he added.

While the volumes in the UV segment decreased by 11% mom, which was an increase of 47% compared to April 2019; Passenger car sales volume also fell 10% and 12% from April 2019, due to a 14% drop in compact car sales volume, according to the report.

According to Ind-Ra, sales of motorcycles and scooters fell 34% and 33% in April compared to March 2021. The two-wheeler segment is price sensitive and, therefore, is more affected by the rising cost of ownership amid OEM price hikes and high fuel prices in India.

This is evident in the 36% drop in sales volume of the more price-sensitive entry-level motorcycles under vehicles with a capacity of 125cc. Demand has also been affected by schools and colleges remaining closed, which typically restart in the April quarter, he said.

Two-wheeler volumes were also affected by the maintenance shutdowns undertaken by the biggest major two-wheeler hero on a gradual basis from April 22, Ind-Ra said.

Retail sales also fell in April 2021, according to the rating agency, as passenger vehicle and two-wheeler volumes fell 25% and 28%, respectively, on a sequential basis.

The decline follows a sustained rise in demand in most segments between December 2020 and March 2021, suggesting a slowing in improving consumer sentiment.

Inventory at passenger vehicle (PV) dealerships fell to 15-17 days the previous month, from 10-15 days in March, he said.

In addition to the closing of dealerships due to the foreclosure, Ind-Ra expects the increase to be due to OEM inventory replenishment with dealers due to supply chain issues encountered in the quarter of March 2020. While inventory at two-wheel dealers remained stable at 30-35 days at the end of April, he added.