The Outlook for India’s domestic auto sector has been upgraded to “better”!!

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The Outlook for India's domestic auto sector has been upgraded to better.
The Outlook for India's domestic auto sector has been upgraded to better.

Credit rating company India Ratings and Research revised its outlook for the domestic automotive industry to “Improving” from “Negative” on Friday as a result of the faster-than-expected turnaround in passenger vehicle and two-wheeler sales in the last six months.  As a result of improved economic development and a move toward private transportation to escape the COVID outbreak, sales increased.

After a predicted decline of 14 % -18 % in FY21, the ratings firm expects auto volumes to recover at 16 % -20 % in FY22. Persistent demand for personal mobility in both urban and rural markets will be beneficial to passenger vehicles (PVs) and two-wheelers (2Ws). In FY22, PV and 2W sales are expected to increase by 18% -22% y-o-y and 16% -20%, respectively.  The lower growth of 2Ws compared to PVs may be due to their higher ownership costs. Commercial vehicles (CVs) could rise by 25% to 30% y-o-y in FY22, aided by an uptick in industrial production, increased infrastructure/construction activities, and a low base owing to the slowdown in FY20-FY21, according to Indian Ratings analysts in a report. The Report from Analyst suggests that India Ratings expect limited rating movement in the FY22 and maintains the stable outlook.  After falling by 8% -10% in FY21, industry revenues are expected to rise 16 percent -20 percent in FY22.

Due to an economic downturn caused by the bankruptcy of Infrastructure Leasing and Financial Services Ltd and a rise in vehicle prices as a result of the transition to new safety and emission norms, automakers across segments have seen continuous declines in sales since the second half of FY19.

The Analyst also reported the FY22, credit metrics will improve. Due to a weaker base in FY21, CV player’s margins and credit metrics are expected to rise faster than the industry’s. The industry’s refinancing risk is limited, and there is plenty rating headroom.

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