Covid-19 Pandemic A big blow to self-component SMEs: CRISIL SME Tracker

Small and medium-sized enterprises (SMEs) in the automotive aftermarket are expected to be severely hit this year by the developments of the Covida 19 pandemic.

The pandemic is expected to affect both supply and demand in this sector. The one before the 14th. The national ban introduced in April has led to the cessation of production and if it is extended it will suffer even more. And the feeling of demand must remain moderate, even if the blockade is lifted.

The sector should therefore be affected in the first quarter and to some extent in the second, although the situation should gradually improve in the second half of the financial year.

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To date, 66% of demand for automotive parts comes from Original Equipment Manufacturers (OEMs), 19% – of exports and the remaining 15% – from the aftermarket.

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Small and medium-sized enterprises, which make up one third of the sector and are essentially Tier II and Tier III players, and which meet the requirements of Tier I players, the aftermarket and equipment manufacturers, are likely to be seriously affected to a certain extent.

In financial year 2020, demand from these SMEs fell by 12% in value, with OEM production falling from 11% to 33% per asset class. Although substitution demand mitigated the decline somewhat, actors were still operating below their optimal capacity utilisation.

Given the prospect of production disruptions and weak demand, demand for car parts is expected to decline in the fiscal year 2021 as well. OEM demand in all asset classes is expected to decrease by 7-15%.

Export demand is expected to fall by 15 per cent in value as more than 50 per cent of exports are destined for Europe and the United States and demand in these markets is expected to fall as a result of Covida-19.

Replacement demand is expected to lead to a slight increase of 3% (in value) as the purchase of new cars is abandoned.

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