In an announcement, the ranking company attributed the revision in gross sales forecast to “general macroeconomic state of affairs, the COVID-19 demand-supply disruptions, looming earnings uncertainties and elevated price of possession of BS-VI autos”.
The combination capability utilisation ranges for the business pattern is predicted to say no to 55-60 per cent from round 70 per cent, it added.
“Nonetheless, regardless of moderation, the 2W OEMs will proceed to have sturdy credit score profiles characterised by wholesome return on capital employed (ROCE) — common ranging between 18-20 per cent — and cozy steadiness sheets with negligible debt and robust money and liquid investments,” the scores company stated.
Whereas any main growth plans are anticipated to be deferred until the demand recovers sufficiently, it’s anticipated that authentic tools producers (OEMs) will proceed investing in new product growth and community growth, it added.
ICRA stated regardless of the general muted macro-economic sentiments, on the optimistic facet, the agricultural economic system presents some development off-shoots within the type of wholesome rabi output and decrease COVID-19 impression.
“Greater farm earnings has led to sequential pick-up in 2W demand in June and July 2020. After a well timed onset, monsoon progress stays wholesome throughout most areas…These components coupled with authorities’s numerous agri-focused initiatives, are anticipated to help farm money flows and 2W demand,” it added.
Within the city markets, which have been extra severely impacted by the pandemic, a choice in direction of private mobility may push near-term 2W demand, ICRA stated.
Nonetheless, “these would solely assist to partially offset the opposed impression of the pandemic”.
“Given the expectation of sharp decline India’s GDP, decrease job creation and earnings uncertainties, two-wheeler demand will most definitely stay adversely impacted. There’s a chance of downtrading by shoppers as effectively as soon as the economic system begins to cripple again to normalcy,” ICRA stated.
On export entrance, whereas long-term drivers stay beneficial, COVID-19 fallout and volatility in crude oil costs, because it impacts demand in key markets, stay a close to time period damaging.
“Nonetheless, a lovely product portfolio and continued focus of Indian 2W OEMs on constructing and increasing abroad gross sales and after gross sales networks, alternative market, present potential for development within the medium time period,” it stated.
ICRA additional stated whereas near-term demand atmosphere stays difficult, it continues to take care of a quantity compound annual development price (CAGR) estimate of 6-Eight per cent for two-wheeler section over the medium time period.
“That is backed by optimistic structural components like beneficial demographic profile, rising center class, low 2W penetration, bettering financing availability, participation of ladies within the workforce and speedy urbanization,” it stated.
Moreover, the scores company stated, “The under-developed public transport system, within the backdrop of accelerating highway community, has steered private mobility necessities which additionally continues to help the demand for two-wheelers.”