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Vehicle sales in the country have been hit as automakers struggle to cope with the ongoing global chip shortage. The latest data released by the Federation of Automobile Dealers Association (Fada) suggests a decrease in vehicle retail sales.

As per the data, total vehicle retail sales for the month of September 2021 was down 5.27 per cent on a year-on-year (y-o-y) basis. Compared to September 2019, sales were down 13.50 per cent last month.

The data highlighted that three-wheeler retail sales increased 51 per cent on a y-o-y basis, while passenger vehicle sales were up 16 per cent and commercial vehicle retail sales were up 47 per cent. Meanwhile, two-wheeler and tractor sales fell 12 per cent and 24 per cent respectively.

Total retail sales grew by 35 per cent on a y-o-y basis during the first half of FY22, with the highest growth seen in the CV segment at 127 per cent. Compared to 2019, sales were down by 29 per cent. Except for tractors sales, which has grown by 19 per cent, all the other categories continued to be in red.

The association has requested all two-wheeler original equipment manufacturers (OEMs) to announce special schemes for demand revival in the entry-level 2W (below 125CC) segment.

CHIP SHORTAGE WOES

The semiconductor shortage has dented automobile sales as dealers are unable to meet deadlines due to an acute demand-supply mismatch, resulting in long waiting periods.

FADA President, Vinkesh Gulati said, “Auto retail in the month of September has taken a pause as overall sales were down by 5 per cent. During the 1st half of this FY, while the overall retails were up by 35 per cent, the same was down by 29 per cent when compared to 2019, a pre-covid year. On a long term basis, except tractors which grew by 19 per cent and PV which has almost reached pre-covid levels, all the other segments were in the red.”

With the festive season around the corner, the semiconductor crisis continues to disrupt PV sales as vehicle inventory with dealers have dipped to record lows. With high demand in this segment, long waiting periods continue.

Meanwhile, the entry-level two-wheeler segment continues to see sluggish momentum.

This segment’s performance is now becoming critical for the overall market to make a come back on the path of recovery as dealer inventory rises to 30-35 days. The semiconductor shortage has also started impacting the 150+ cc segment.

The three-wheeler segment is now showing clear signs of a tactical shift from ICE to EVs. With offices and educational institutions opening up, electrification of three-wheelers will gather greater momentum in months to come.

NEAR TERM OUTLOOK: A MIXED BAG

With India entering the 42-day festive period beginning today, the near-term outlook for this year’s festive season will be a mixed bag. While dealers have increased their inventory in the two-wheeler category, PV inventory is at the lowest during this fiscal year due to the ongoing semiconductor crisis.

The chip shortage looks less likely to ease within the next two quarters. As a result, PV sales is likely to stagnate going ahead even though OEMs are coming ahead with new launches to keep customers excited.

With skyrocketing fuel prices and a drop in purchasing power, entry-level customers in rural India are also shying away from making new purchases.

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