The Indian automotive industry is facing an unprecedented slump with the Covid-19 driven lockdown in March and April 2020 eroding a sizeable share of the annual demand.
Sales were already slowing sharply since the second quarter of fiscal 2019 because of the economic slowdown.
Domestic demand for vehicles faces headwinds from income uncertainty, restricted mobility, deferral of discretionary purchases and suppressed economic activity, so recovery will be gradual.
Consequently, the automotive components sector, which derives almost two-thirds of its revenue (~Rs 3.2 lakh crore in fiscal 2020) from sales to vehicle makers (the rest comes from the aftermarket and exports), would see the second straight year of double-digit decline in demand growth.
Exports will be curbed as well, while aftermarket demand, which generally offers some revenue stability even during downcycles, would plumb historical lows.
In the past, credit risk profiles of auto component makers have been resilient despite the cyclicality of the business because of strong balance sheets. These will face a litmus test now.
In this context, CRISIL will be hosting a webinar where its experts will discuss:
Impact of the pandemic on the automobile and automotive component sectors
Demand drivers and outlook
Expectation on the investment cycle
Outlook on profitability and credit quality of automotive component players
This will be followed by a panel discussion with industry experts and a Q&A session.