CRISIL expects auto aftermarket spend to slide 11 per cent this fiscal
CRISIL released a report on Thursday on automotive aftermarket spending. It expects nearly 11 per cent decline in the current financial year on the auto aftermarket spend due to the nationwide lockdown imposed to prevent the spread of COVID-19. Based on the analysis of 75 mega districts in the country, which accounts for 43 per cent of the segment's total revenue, it expects the annual running of vehicles (in kilometres) to decline.
The report indicates that the tractors and passenger vehicles (PV) are least to bear the brunt due to the maintenance expenses after lockdown for PV and unaffected demand for tractors. It expects 4 per cent and 3 per cent fall in spending on tractors and PV, respectively. While the commercial vehicle, three-wheelers (3W) and two-wheelers (2W) are likely to witness 18 per cent, 19 per cent and 12 per cent decline in spending, respectively.
According to the report, these districts together account for a significant chunk of automobile sales by original equipment manufacturers (OEMs) and 46 per cent of the total number of automobiles in the country. It said aftermarket automotive spends are typically driven by annual running and replacement frequency. It noted that the economic crisis brought on by the extended lockdown is expected to whip up the woes of the auto component industry, including tyres, engine oil and lubricants, this fiscal.
In two-wheelers, a high proportion of aftermarket spend goes towards tyre and engine oil replacement, which will be sharply lower as both are directly linked with annual running. Besides, 2W owners are likely to heavily downtrade or opt for cheaper options in the aftermarket – given the impact of the economic slowdown. Further, as work from home gets replaced by going to offices for work, the usage of 2Ws should improve gradually as commuters increasingly prefer personal vehicles.