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Analysis: India's faltering driving activity, dismal vehicle sales cast shadow over gasoline demand outlook


Driving activity at 46% below baseline levels

Q2 gasoline demand expected to fall below 6.5 million mt

Decline in vehicle sales forces plant closures

  • Author
  • Mark Tan    Clement Choo    Gawoon Philip Vahn
  • Editor
  • Wendy Wells
  • Commodity
  • Natural Gas Oil Metals

Singapore — India's driving activity has nosedived to the lowest level in a year in early May, while commercial and passenger vehicle sales tumbled in April, as the coronavirus pandemic continues to rage domestically, casting a shadow over the country's gasoline sales and demand outlook.

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Driving activity in India was 46% below baseline levels May 2, a sharp fall from almost 100% above baseline levels in mid-March, according to mobility data from Apple.

The last time driving activity in India was recorded at such a low level was in May 2020, when the country was gradually easing restrictions after a nationwide lockdown.

With driving activity again faltering in May 2021, domestic gasoline demand is expected to follow suit, refinery officials, fuel traders and middle distillate distributors told S&P Global Platts.

Retail sales of gasoline had already hit a multi-month low in April at 2.14 million mt, according to multiple industry sources with close knowledge of the data.

"[Indian gasoline] sales in April were down by around 7%-10%. This could fall some more moving forward should the restrictions stay," a source with an Indian refiner said.

Federation of Indian Petroleum Industry director general R. K. Malhotra told Platts that demand for gasoline was bound to take a big hit in the current quarter as residents opted to stay at home amid high coronavirus infection rates.

India's domestic gasoline consumption had staged a strong rebound to 8 million mt in fourth quarter 2020 from a low of 5 million mt in Q2 2020, Petroleum Planning and Analysis Cell data showed. However, demand slipped to 7.8 million mt in Q1 this year and was expected to pull back sharply to 6.5 million mt or lower in Q2, according to multiple fuel distributors and middle distillate marketing managers at major Indian refiners including Indian Oil Corp. and Bharat Petroleum Corp. Ltd. surveyed by Platts.

India reported 357,316 new cases of COVID-19 May 3, data from the World Health Organization showed, down from a record high of 401,993 on May 1.

Several states such as Uttar Pradesh, Maharashtra and Rajasthan have imposed strict lockdown measures in a bid to curb the spread of the virus, while others including Punjab, Uttarakhand and Gujarat have imposed strict night curfews.

City centers such as New Delhi and Mumbai, where large proportion of driving activity takes place, also remain in lockdown. Driving activity in New Delhi and Mumbai on May 2 was recorded at 63% and 69% below baseline levels, respectively, Apple mobility data showed.

Vehicle sales tumble

India's vehicle makers saw sales tumble in April due to pandemic-induced plant shutdowns, impacting their requirements for automotive steel, and painting an even more bearish outlook for the country's motor fuel demand.

Hero MotoCorp's vehicle sales fell 35.5% month on month to 372,285 units in April. A year-on-year comparison was not available as production and sales outlets were shut in April 2020 during the nationwide lockdown.

"The sales in April 2021 were subdued due to the temporary closure of plant operations and retail outlets across several key territories in India on account of the impact of the second wave of COVID-19," Hero MotoCorp said May 1, adding it had halted plant operations temporarily in staggered four-day outages over April 22-May 1.

Hero MotoCorp subsequently extended the shutdowns to May 9 as domestic infections surged, and plans to resume production May 10. The company has the capacity to produce 9.1 million units/year of two-wheeled vehicles, of which 8.9 million units/year is based in India.

Suzuki Motor Gujarat, which is wholly owned by Japan's Suzuki Motor Corp., will shut its 750,000 unit/year plant at the same time as Maruti Suzuki, which is 56.21% owned by the Japanese vehicle maker and the rest by the Indian government.

Despite the tumble in the automotive sector, hot-rolled coil prices remain high in India even as domestic steelmakers step up efforts to supply liquid medical oxygen to offset the strain caused by the surge in COVID-19 infections.

"JSW Group, which is the largest oxygen-producing private steel company in the country, has committed to maximize the supply of oxygen from his plants to save the lives of fellow Indians," JSW Steel said in a statement to Platts May 3, quoting its chairman and managing director Sajjan Jindal. JSW Steel had aimed to supply more than 20,000 mt of liquid medical oxygen in April and raise production of the gas to 1,200 mt/day.