Crisil Says Q2 Plunge In Rural Auto Demand Washes Out Gains Of Previous Quarter
People walk past a Mahindra & Mahindra Ltd. showroom in Mumbai, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Crisil Says Q2 Plunge In Rural Auto Demand Washes Out Gains Of Previous Quarter

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High coronavirus infections in hinterland during the second quarter had an unusual collateral victim—auto demand that plunged after soaring sales in the previous three months—almost wiping away the high double-digit growth in the June quarter, according to a report by ratings agency Crisil.

When the nationwide lockdown was imposed on March 25, there were just under 500 infections across the nation—mostly in Mumbai and Kerala. But since then it steadily rose and today the caseload is upwards of 8.4 million and around 1.25 lakh death due to the pandemic.

During the first three months of the lockdown, as much as 82% of infections were in large urban centres. In the second quarter, however, the share of rural infections more than doubled to 38%.

In the first quarter this fiscal, the share of rural markets in automobile retail sales increased year-on-year, while that of urban regions dropped.

That's because when the pandemic barreled into the country, it rammed urban regions first with 82% of the cases were in those areas at the end of the first quarter. The rural regions, with only 18% of the caseload, were less affected, Crisil said in a report on Friday.

However, in the second quarter, the pandemic penetrated deeper into the hinterland, and the share of fresh rural cases more than doubled to 38% by September. Thus, the share of rural regions in automobile sales dropped sequentially across segments in the quarter, it added.

Between the first and second quarters, the rural caseload jumped 21.5 times, while the same in urban centres rose only 8.5 times, the report said.

"While car sales in the hinterland rose 36% in Q1, it tanked 34% in Q2. Similarly, two-wheeler sales plunged 46% in Q2 as against a 51% jump in Q1, and when it comes to medium commercial vehicles, Q1 saw a 44% rise in sales, which plummeted by 43% in Q2," it added.

Also read: No Festive Boost Yet For Retail Auto Sales

This means that the second quarter wiped out the entire gains in the first quarter.

After increasing in the first quarter, the share of auto retail sales in rural markets has declined sequentially, owing to an increase in caseloads, said Crisil, which is based on the retail sales in 410 districts with over 60% population in rural areas. The sales numbers exclude data from Andhra Pradesh, Madhya Pradesh and Telangana.

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