TVS Motor Company believes that the business environment would remain challenging for most part of the current financial year due to the coronavirus pandemic. It expects some relief only in the later part of the year, as mentioned in its annual report for 2019-20. The two-wheelers major is betting on a good monsoon to lead to growth in the agriculture sector that would in turn uplift the two-wheeler industry.
"In 2020-21, the economy will see significant challenges owing to the impact of the COVID-19 pandemic and the resultant interruption to economic activity which is beginning to reopen," TVS Motor Company said.
The company said that GDP, disposable income and consumer sentiment would be impacted by the effect on multiple sectors. "Consequently, a very sharp decline in the first quarter of 2020-21 is expected, which may partially alleviate in the following quarter, with any upside possibilities only playing out in the later part of the year," it noted.
TVS said that consumers would prefer to conserve cash in order to prepare for unforeseen events like job loss and salary cuts. This means that non-essential durables would be impacted and could be risky for multiple sectors including automobiles. It said this could lead to a delayed recovery of the two-wheeler sector. "The company is cognisant and is advising dealers and suppliers to make prudent choices in cost reduction and enhance working capital management," the company said.
Availability of manpower is impacting Tier-2 and Tier-3 suppliers affecting the supply of parts and daily operations are likely risks, it added. The company noted that economic activity and lifestyles will have to be rebuilt factoring in coexistence with COVID-19 with social distancing and work from home practices witnessing greater prevalence.
Social distancing could see consumers preferring to buy their own vehicle which could provide some opportunity to the two-wheeler industry.
"The company is cognisant of this opportunity, and well poised to leverage this opportunity with its BS-VI offerings across the widest range of personal mobility needs," it added.
Also read: Auto component sector FY21 revenue may fall 14-18% due to coronavirus crisis: ICRA