Mumbai: Auto sales are likely remain muted for fiscal year 2020 and the first half of 2021 as well, says Mitul Shah, Vice President of Research at Reliance Securities.
“We believe that the next six months would be more tough because of the ongoing slowdown, negative sentiment and the NBFC issue still continuing,” Shah told ET Now.
“Over and above these once this BS-VI comes in and price hike will start impacting affordability, we believe that next one year would be also (tough), he added
“So from current level next one and a half year would remain like current situation – subdued, though there would be some improvement but overall volume will remain muted for FY20 as well as first half of FY21,” he said.
Auto industry typically goes through a cyclical downturn every few years, but tends to bounce back after a rough patch of few months.
Shah pointed that the current situation is slightly different than the previous slowdown.
“Every three to four years, we see such type of slowdown in volumes because of whatever economic reason whether interest rate or NBFC but this is a kind of a cyclical downturn along with the BS-VI transition,” he pointed.
He said that last BS-III to BS-IV norms were introduced, there was a positive cycle going on. He pointed that despite the price hike M&HCV (medium and heavy commercial vehicle ) industry climbed up.
“Despite GST, M&HCV industry (was) significantly up but this time cyclical downturn is again coinciding with the transition from BS-IV to BS-VI wherein as indicated by majority of the automakers price hike would be in the range of 10% plus for most of the categories, which is again very high during the down cycle,” Shah said.
“So that is why we believe that because of the higher price hike as well as slowdown combining together it should last for more than one, one and a half years,” he added.
Even as auto businesses are going to be challenging for the next one and a half years, from valuation point of view many of the stocks are available at all-time low valuation he said.
“If we go by segment wise that passenger vehicle should recover earliest among all tRead More – Source
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