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India's two-wheelers' (2Ws) export volumes will see a sustained growth in the second half of FY21-FY22, expects India Ratings and Research (Ind-Ra).
According to the ratings agency, the industry faced temporary hiccups in 1QFY21 (first quarter of Financial Year 2021) due to the spread of Covid-19 pandemic and weakened crude oil prices, hurting the economies of key exporting destinations for India.
"This coupled with the nationwide lockdown, supply-chain and logistics disruptions impacted export sales significantly," said the agency in a report.
"Since then India's 2W exports have moved in line with growth in domestic markets, with September and October 2020 recording the highest monthly sales in FY20-October FY21."
Accordingly, Ind-Ra expects the exports momentum to continue in the remaining part of FY21 and FY22 primarily driven by the exporting countries' lower penetration level, demand for usage as commercial fleet, stability in crude prices, lack of public infrastructure and aversion to public transport amid Covid-19.
"Moreover with their strong market position and robust distribution network, Indian Original Equipment Manufacturers (OEMs) will continue to gain traction for their key offerings," the agency said.
"Ind-Ra expects the 2W export decline for FY-21 to be in line with that for the domestic industry at 18-21 per cent."
The ratings agency said since 2W exports only accounted for 16-18 per cent of the overall 2W sales for Indian OEMs, this is not likely to be substantial enough to compensate for the domestic volumes during the same period.
"2W exports volumes are likely to increase by mid-teen in FY22," India-Ra added.
As per the report, 2W export sales volumes declined by 29 per cent YoY during April-October 2020, which was lower than the overall auto export sales (excluding CV) decline of 33 per cent during the same period.
"The monthly sales volume recorded during September-October 2020 was the highest among the past two fiscals. This is primarily backed by a gradual recovery seen in key markets, and stable crude oil and forex prices," the report said.
"Most of the key exporting markets in Latin America, Africa and Asia have recovered to 80-90 per cent of pre-Covid export levels."
Besides, the report cited that 2W exports grew at a CAGR of 9.7 per cent during FY11-FY20 compared to 4.5 per cent growth in the domestic markets as major OEMs started looking at export markets to diversify their presence to mitigate intensified competition in the domestic markets.
Even in FY20 exports grew at 7 per cent compared to domestic 2W sales volume decline of 18 per cent.