Indian monsoon forecast gives a ray of hope for all automakers

The Indian Meteorological Department on Tuesday forecasted that this year the monsoon is expected to be 'above normal' at 106 percent, eliciting a sigh of hope across the automobile industry. After two consecutive years of drought wiping off a big chunk of gains made by the automotive industry in the prior three years, this news also serve as a prediction that almost all automotive segments will witness a surge in demand in the next few months of monsoons.

Citing data that proves that there never has been three consecutive years with below normal monsoons in the country, an uptick in the GDP with a substantial bounce effect is predicted for the industry, taking it much higher to the tune of 7 or 8%. Both of India’s premier weather forecast agencies, the aforementioned IMD and Skymet, are on the same side this time round, stating that the monsoon will be above normal this year.

The effect of this prediction will be first seen in the tractor and motorcycle segment and then slowly move to commercial and passenger vehicle segments around six months later, according to industry experts. The light commercial vehicle segment (LCV) has already started seeing growth in the last couple of months and a good monsoon is expected to give a further boost to the demand.

Two-wheeler manufacturers are also expected to gain a lot of market traction in the coming months. After the 2012-13 financial year, the motorcycle production has fallen again in the last fiscal year. Once one of the fastest growing automotive segments in India, the motorcycle segment has been hit the hardest by the faltering rural economy.

"The two-wheeler industry has remained sluggish for the past four years, which has adversely impacted growth. A good monsoon after two consecutive years of sub-normal rains could lead to a change in sentiments in the rural markets," a spokesperson from Hero MotoCorp told ET Auto.

"In addition to a good monsoon, higher spend on infrastructure and an impetus on non-farm rural market could also potentially lead to a positive turn-around in the industry in the second half of this fiscal," he added.

Commenting on the forecast, RC Bhargava, Chairman, Maruti Suzuki, stated, "A lot of people have been predicting a good monsoon even before the official forecast came out as there is no history of three successive monsoon failures. A good monsoon will bring about better demand and it will help better capacity utilisation and the inventories too should go down."

The generous Indian monsoon is also expected to generate good demand for FMCG products, in turn leading to higher demand for logistics services.