Auto Industry Shows Signs Of Demand Stability After 12 Months Of Distress; Last Hurdle Of BS-6 Transition Ahead
Auto Industry Shows Signs Of Demand Stability After 12 Months Of Distress; Last Hurdle Of BS-6 Transition AheadThe BS-VI compliant S-Presso launched by Maruti. (representative image) (via Twitter)

After enduring tough 12 months, the auto industry is seeing signs of demand stability across segments. But it still needs to face the final challenge of Bharat Stage 6 (BS-6) transition, according to a report on Wednesday (25 December).

According to Motilal Oswal Institutional Equities report, the stability has partly appeared due to high discounts, better availability of finance and improvement in rural sentiment.

"While the worst seems to be over, we don't expect secular recovery considering last hurdle in the form of BS-6 transition," the report said.

With demand environment showing signs of stability and inventory under control, "the BS-6 transition is likely to be less problematic" unlike BS-4, it said.

"The BS-6 transition will pose bigger challenge for two-wheelers than commercial and private vehicles given the magnitude of cost inflation, possibility of a change in competitive positioning and the scope of value migration," the report said.

Indian automakers are all set for transition to BS-6 from April, 2020.

Some pre-buying for two-wheelers and diesel private vehicles was expected, but it could be limited in case of commercial vehicles due to 30-40 per cent excess capacity with fleet operators, the report said.

"The sizeable tax cut announced recently by the government improves the long-term attractiveness of the auto sector as cyclical revival in demand would be complemented by disproportionate improvement in RoEs due to lower taxes," it said.

While Eicher Motors, Ashok Leyland, Escorts, Hero Moto, Bosch, Amara Raja, Exide and CEAT may gain the most from the tax rate cut, Maruti and Tata Motors could benefit the least, it said.

"Some of the OEMs have used the tax savings to directly or indirectly spur demand," said Motilal Oswal report.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber