 "BS-VI norms pose challenges for auto industry, demand uncertain in H2 FY20")
The transition to BS-VI emission norm from BS-IV will pose challenges for the automobile industry with uncertainty of demand expected to be high in the second half of 2019-20, according to TVS Motor Co.
The Chennai-based company also said the growth in two-wheeler industry during 2019-20 is expected to be around 6-8 per cent over 2018-19 while stressing that any negative deviation from normal monsoon is a cause for concern.
"Majorly, industry will undertake a significant change in migrating from BS-IV to BS-VI emission norms commencing from April 1, 2020. Hence, in second half of 2019-20, BS-VI transition will pose some challenges and the company is gearing itself to meet the same," TVS Motor Co said in its Annual Report for 2018-19.
It further said, "Uncertainty of demand due to upcoming emission regulation will be high in second half of 2019-20" and, therefore, "product readiness, supply chain readiness and dealership readiness will be crucial".
Sharing its outlook with the shareholders, TVS Motor Co said higher year-end inventory across trade and higher product costs due to escalated commodity prices of last year, and advanced safety regulation implementation from April 2019 can impact the industry growth in the initial part of the year.
On the other hand, the company said the trend of increased crude prices and improved exchange to local currency is expected to aid export market growth, especially in oil-dependent economies.
"Consequently, the growth in the two-wheeler industry during 2019-20 is expected to be around 6-8 per cent over 2018-19," it said.
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On the impact of rainfall across the country, the company said, "Good monsoon aids growth in domestic two-wheeler demand due to a significant share from rural markets. Any negative deviation from normal monsoon is a cause of concern."
TVS said international factors such as geo-political scenarios and rising crude oil prices are being continuously monitored for both risks and opportunities.
"Changing trade policies of US, Brexit and unforeseen challenges in Chinese economy can lead to escalation of uncertainty in global economic growth," it said.
Crude prices are expected to remain at the increased level of fourth quarter of 2018-19 during 2019-20 and may lead to higher costs for customers and original equipment manufacturers (OEMs), it added.
The firm said Indian economic activity is expected to be at the same level of last year and recent government actions on improving income for farmers and lower middle class can support improved consumption.