Country’s automobile sector fears another dip as sales of vehicles, fuel drop in the wake of COVID lockdowns

As COVID continues to ravage the country and more and more areas coming under lock-down like restrictions, the automobile sector is worried about that the green shoots that had begun appearing may not survive for long.

According to reports quoting a top BPCL official, fuel sales in April have plummeted, with the overall demand at the end of the month falling by 7 percent. Preliminary data released by state-owned retailers shows petrol sales were the lowest since August last year.

There has been a similar fall in the sale of automobiles as well, particularly in the passenger car segment. Offtake of vehicles by dealers from the manufacturers is down by 7 percent in April, compared to the previous month. April last year, at the peak of the lock-down period, had marked a total washout.

Major carmakers, including Maruti Suzuki and Toyota, as well as two-wheeler brands like Hero and Honda, have already announced a suspension of production at their plants in view of the second wave of infection. Some of them have used the disruption to run their maintenance programmes.

Within a week, global energy consultants Rystad Energy has lowered India’s refined products demand estimate and forecast a drop to 2.8 million bpd in May 2021, a 160,000 barrel per day (bpd) downward revision from the estimate a week earlier.

Even as the total number of daily cases crossed 4 lakh and lockdowns remain firmly in place, the agency’s Real Time data shows that the impact of mobility restrictions has reduced traffic in India to 78 percent of pre-pandemic levels, prompting a revision of the Indian refined products demand down by a total of 850,000 bpd in 2Q21 compared to pre-pandemic levels.

Consequently, this has led to revision of India’s refinery runs down to 4.2 million bpd during May, a 600,000-bpd monthly decrease from its own previous forecast.

After showing surprising resilience during April, Rystad expects India’s refinery runs to drop by 700,000 bpd month-on-month in May as refiners will have to adjust throughput to respond to the imminent demand destruction.

Despite major refiners planning to delay seasonal maintenance, the refineries are expected to reduce throughput to absorb the drop in domestic road fuel demand.

According to the agency’s estimates, overall, India’s refinery runs will average 4.8 million bpd in 2021. That would be 200,000 bpd below its own previous forecast and 340,000 bpd below pre-pandemic levels.

In fact, the steep rise of COVID-19 infections in India and the continuously worsening situation in the country has prompted Rystad Energy to significantly downgrade its short-term global liquids demand estimate.

Rystad said that with India’s backstep coinciding with OPEC+ bringing back much of its curtailed oil output, the demand loss from one of the world’s largest oil consumers will result in a global oil liquids supply surplus of 0.9 million bpd in April and 1.4 million bpd in May 2021.

The consultancy referred to plummeting traffic in major cities like Mumbai, Bangalore, and New Delhi and compared the situation to the one that prevailed during the first wave of lockdowns a year ago.

On top of night and weekend curfews, many states have imposed strict lockdowns overnight, shutting down non-essential businesses and limiting public transport, it noted.

In Mumbai, for example, traffic has come to a near standstill, with activity levels just 45 percent of normal pre-pandemic levels, compared to the drop down to 35 percent in April 2020. Overall, road traffic in India is at 87 percent of pre-pandemic levels.

Rystad Energy’s mobility stringency index showed that Indians were just as restricted in their movement now as they were back in April 2020.

When the country first locked down in April 2020, products demand cratered to 3.13 million bpd, but has been on a steady recovery trend over the past year. The sudden and very strict lockdowns imposed in the past few days will result in a 13% demand drop in India in April compared to March 2021.

(IPA Service)