Crisil Research in its latest report has said that automotive aftermarket spending is expected to decline by 11 percent in the current financial year (FY21) owing to nationwide lockdown to limit the spread of Coronavirus disease (COVID-19) pandemic. Based on the analysis of 75 mega districts in the country, which account for 43 percent of the segment's total revenue, it expects the annual running of vehicles (in kilometres) to decline, with three-wheelers likely to see the highest decline of 22 percent and passenger vehicles and tractors seeing the lowest decline of 4 percent during FY21.
According to the report, these districts together account for a significant chunk of automobile sales by original equipment manufactures (OEMs) and 46 percent of 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.
The report further stated that utilisation in commercial vehicles had reached 25-30 percent by May-end and is likely to touch pre-Covid levels only by September, and reduced running along with the highly price-sensitive nature of customers in this segment will drive down aftermarket spends. 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, two-wheeler owners are likely to heavily downtrade or opt for cheaper options in the aftermarket, given the impact of the economic slowdown. Usage of two-wheelers should improve gradually as commuters increasingly prefer personal vehicle.
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