The financial profile of most industry players
is strong despite all segments displaying a year-on-year (y-o-y) decline in
sales volumes during April-December 2013.
It has been believed that the low leverage (net
adjusted debt/EBITDA) of most auto original equipment manufacturers (OEMs) gives them the financial flexibility to maintain
the ongoing economic downturn. However, OEMs with limited product and
geographic diversification could face further credit profile weakening.
Commercial vehicles (CV)
segment is expected to post a 6%-9% y-o-y decline in domestic volumes in 2014-15.
Most truck fleet operators are likely to defer investments in new vehicles at
least till the first half of 2014-15 as there is decline in their operating
margins.
Volume growth in passenger vehicles, UVs and MPVs
will decline 3%-8% y-o-y in 2014-15 due to the rising cost of ownership and
shrinking discretionary spending power of the average consumer.
Further,a
capacity addition of 1.6 million units and 0.2 million units is expected over
2013-14-2014-15 in PV and CV segments, respectively.This is likely to
result in capacity utilization falling to 45%-47% in 2014-15 for PVs from
around 54% estimated for 2013-14. The capacity utilization would decline to
35%-37% in 2014-15 from an estimated 40% in 2013-14 for CVs.
