Car Sales In India To Stabilise In 2020 On Back Of Stimulus Measures, Discounts: Moody’s

Car sales in India are expected to be relatively flat this year after plunging 11.8 percent in 2019 amid slowing economic growth, as per Moody's Investors Service.

The rating agency also lowered its global sales forecast as the coronavirus outbreak reduces demand and disrupts automotive supply chains. "We expect Indian auto sales to rise 0.5 percent in 2020, supported by stimulus measures, discounts on new cars that do not comply with Bharat Stage-VI emission norms, which will take effect in April," the ratings agency said in a statement.

But weak consumer demand and tight liquidity will likely limit any improvement in car sales this year, it added. "In 2021, we expect Indian car sales to rise 2 percent," Moody's Investors Service said. Commenting on global auto sales, it said, "We expect global auto unit sales to decline 2.5 percent in 2020, narrowing from a 4.6 percent drop in 2019, but worsening from the 0.9 percent decline that we had previously projected for this year."

The rating agency expects sales to rebound only modestly in 2021 with growth of 1.5 percent. "Our outlook on the sector remains negative," Moody's Investors Service said. It further noted, "We would consider returning to a stable outlook if we were to expect global light vehicle sales growth to recover to at least 1 percent over the next 12 to 18 months. A stable outlook would also require improving pricing and at least stable capacity utilisation."

Moody's also predicted auto sales decline in China. "In the wake of the coronavirus outbreak, we expect auto sales in China, which includes both passenger vehicles and commercial vehicles, to fall 2.9 percent this year, a meaningfully weaker performance than the 1 percent growth we had previously projected," Moody's said.

Elaborating on the market, it said that cautious consumers are steering clear of crowded areas, including auto dealerships, while corporate demand for vehicles is weakening as broader economic uncertainties cause companies to scale back capital spending. "Work stoppages and lower production levels because of government-mandated business days off, the reduced flow of migrant workers across China and disruptions in auto-parts supply chains have lowered production levels," it added.

"As a result of these factors, we expect auto sales to decline significantly year-over-year in February and March, with automakers likely to claw back only about half of the lost sales during the balance of the year. We expect Chinese auto sales to swing back to growth in 2021, with a rebound of about 2.5 percent," it further said.