Skymet monsoon forecast could dampen vehicle buying sentiment

These are early days yet but Skymet’s prediction of a deficit southwest monsoon may not be the best piece of news for some segments of the automotive industry.

The private weather forecasting company has indicated that Gujarat, Rajasthan and parts of Kerala could be the most affected once the impact of the rains is felt in end-September. If this translates into drought-like conditions where farmers will face challenges in getting sufficient revenue for their crops, this does not augur well for vehicle sales.

Typically, this means that entry-level motorcycles and small cars along with tractors could feel the heat though it is way too premature at this point in time to predict what will happen. Farmers will be hoping that rains are adequate to keep their income levels going in the months to come.

After all, this has been a difficult year for rural India which has borne the brunt of the second wave of the pandemic. Lives have been lost and families have seen their savings wiped out while seeking medicare for their loved ones. The last thing they would want now is for the monsoon to weaken and affect agriculture incomes.

As an auto industry executive puts it, “The biggest issue now is sentiment…if farmers get into anxiety mode on poor rains, they will just put purchases on hold. They are not going to think of buying a motorcycle or tractor in a hurry.”

Hence, even if the rains finally end up being more than adequate, it is the issue of sentiment that could impede buying in the interim period. The key stakeholders concerned, be it the farming community or automakers, will be hoping that there is no shortfall since the aftermath could see vehicle sales being impacted.

The tractor industry has already indicated that the second wave of Covid-19 has completely derailed the growth story in the early part of this fiscal. This is in sharp contrast to 2020-21 when tractor sales were up by nearly 30 percent thanks to a whole lot of tailwinds ranging from government support, timely rains and more disposable income with farmers.

This time around, things have become far more difficult in rural India even while there are conflicting versions of a rebound happening. Experts reckon that Uttar Pradesh, Madhya Pradesh, Odisha and Jharkhand are seeing good two-wheeler sales while one would have to wait a bit longer in parts of the south where farmers are awaiting the northeast monsoon later this year.

A setback in Gujarat and Rajasthan will have its implications except that the industry will be hoping that the impact is minimal. The key is to ensure that there is enough water supply in reservoirs and other catchment areas for the farms. 

Carmakers, meanwhile, are banking on sales of compact models and the preowned segment to keep the growth story going in rural India. Entry-level motorcycles will fuel the two-wheeler story while tractor makers will be keeping their fingers crossed about things turning the corner in the remainder of the fiscal. It’s now up to nature to comply and ensure that the rains do not play truant.