Recovering Auto Sector

Why in news?

Coming out of lockdown, the Indian automobile sector is seeing a recovery trend.

What is leading to the recovery in India?

Demand for compact small cars mostly by first-time buyers is driving the car sales in India.
The new realities of social distancing and scare of contracting the virus is driving more and more individuals to buy a car.
While urban areas have been more impacted by Covid-19 and the lockdown, rural India is witnessing a faster recovery.
Manufacturers are expecting the recovery trend to remain strong as the inquiries and booking are rising fast.

Which segment is seeing the demand?

The companies who do not have small cars in their portfolio have lagged in recovery in June 2020.

Is the recovery momentum expected to continue?

The enquiries and bookings are on a steady rise in the auto sector.
As demand is on the rise, the elimination of production and supply bottlenecks will only improve the sales efficiency going forward.
The demand from the consumer side has achieved a 80-85% normalcy.
But, the industry is still at around 50% normalcy when it comes to wholesale sales.
However, that is improving with every passing week.

Why is auto sector important?

Indian automotive industry accounts for over 7 % of the country’s GDP.
It accounts for 22% of the manufacturing GDP.
The industry supports more than 3.7 crore employment.
With GST collections of around Rs 1,50,000 crore, it accounts for nearly 15% of total GST collection of the country in a year.
The sector is one of the biggest recipients of foreign direct investment.

What could hinder the revival momentum?

A spike in Covid-19 cases in India both in rural and urban India may just derail the recovery momentum.
This spike may force the centre and states to go slow on reopening the economy or to even close certain activities that have been permitted.
It may also limit the movement of workers, derailing the production revamp process for the industry.
As India reopens, it needs to closely monitor the case numbers and containment zones in order to avoid the community spread.

Source: The Indian Express