Stopped Revenue, Declined EBITDA Margin And Much More From Auto Sector


Car manufacturers have declined and demand has stabilized in all areas. The NBFC crisis, followed by lower volumes and increased competition, weighed heavily on automotive equipment manufacturers (OEMs). Large resellers across the country are clogged with high inventories, prompting OEMs to reorient their production. To get ahead, two-wheeled vehicles weigh heavily to boost sales while attempting to meet the standards of the combined braking system (CBS) and the anti-lock braking system (ABS), which will increase costs.

While private vehicles have had a huge job with resellers in all geographical regions facing larger stocks, commercial vehicles (CVs) are in the recovery phase, led by a new payout from the NBFCs. Competition has intensified sharply in the two-wheel segment since Bajaj Auto Ltd entered the entry-level segment aggressively.

The overall scenario for manufacturers of two-wheeled vehicles has remained in a negative zone since the second quarter of 19 Years as it struggled with lower demand and higher insurance costs. However, the inability of OEMs to increase sales and not realign inventory led to an increase in reseller inventories. While most OEMs started a price increase in the Q4 of 2019, they were lost due to the higher discount at the retail level.

Commercial vehicles were among the most affected by the liquidity crisis that emerged after the issuance of IL&FS. As all programs are funded by different financial institutions, they are mostly affected. Although liquidity played a role in reducing demand, real estate projects, and construction projects also suffered a considerable delay, which affected the additional demand for CVs. While the months of January and February were the most striking, March numbers appeared with some improvement monthly. Ashok Leyland expects a tilt quarter with modest revenue growth, while EBITDA margins are anticipated to drop due to higher discounts.

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