Passenger Vehicle Segment to Lead Sales Recovery to Pre-pandemic Levels: Crisil

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Mercedes-EQ Family Immendingen 2021; Ola Källenius, Vorstandsvorsitzender der Daimler AG und der Mercedes-Benz AG Mercedes-EQ Family Immendingen 2021; Ola Källenius, Chairman of Daimler AG and Mercedes-Benz AG

Passenger vehicles (PV) dealers are expected to lead a recovery among all automobile dealers sub-segments with 20 to 22 % revenue growth this fiscal to almost reach pre-pandemic revenue levels of fiscal 2020, said rating agency Crisil.

Comparatively, due to slower recovery, two-wheeler (2W) dealers will take a year or so longer to reach pre-pandemic sale levels.

The pace of recovery could have been swifter but for the second wave of Covid-19 infections which led to partial shutdown of dealers’ showrooms in the first quarter of fiscal 2021.

Revenues for commercial vehicles (CV) dealers will remain below pre-pandemic levels this fiscal despite higher revenue growth due to a low base created by sharp fall in last two fiscals, said Crisil.

“PV dealers seem to be recovering faster compared with other categories, riding on higher pent-up demand and preference for personal mobility, especially in urban and semi-urban areas. Slower demand from pandemic-hit hinterland, increased spend on health and prices hikes are likely to impact the pace of recovery in two-wheelers (2Ws) dealers. As a result, PV dealers’ revenues will grow at 20-22%, well over 15-16% revenue growth for 2W dealers. CV dealers, though, will see healthy revenue growth of 28-30% this fiscal on a low base, but will remain below pre-pandemic levels given sharp fall in the previous two fiscals.” said Anuj Sethi, Senior Director, CRISIL Ratings.

Cash flows are expected to gradually recover, and along with controlled channel inventory and limited increase in debt, lend stability to credit profiles this fiscal. A study of 191 automobile dealers rated by Crisil Ratings indicated.

While business performance was severely dented last fiscal, dealers availed of moratorium and emergency credit facilities offered by banks and support from captive finance arms of original equipment manufacturers (OEMs) as well as OEMs themselves through inventory funding limits and higher credit period, respectively, to tide over liquidity pressures. This year too, similar support is expected to continue for dealers from OEMs or their captive finance arms until sales recover completely.

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