Auto retail improves in June, new mutations and third wave continue to pose risk: FADA

The Federation of Automobile Dealers Associations (FADA) today released vehicle retail sales data for June 2021. The month saw overall sales of 1,217,151 vehicles in India (+22.62% YoY on a low base) compared to 992,610 units a year ago.

All vehicle segments have come out positive which includes 930,324 two-wheelers (+16.9%), 14,732 three-wheelers (+21.98%), 181,434 passenger vehicles (+43.45%), 52,261 tractors, 35,700 commercial vehicles and 2,384 other vehicles.  

Interestingly, the sole segment which was positive compared to June 2019, was the tractor segment that has been in the fast-growth lane.

In terms of inventory, FADA says till end-June, the average inventory for passenger vehicles was 30-35 days, while for two-wheelers it was 20-25 days.

FADA atrributes  the improvement in monthly sales  to "reopening of most states, except the ones in south and high pent-up demand which was stuck in the system because of state-wide lockdowns."

Vinkesh Gulati, president, FADA said: “While all the categories were in green, passenger vehicles maintains to see good demand as customers continued to show keenness in vehicles for observing social distancing and safety of their families. Two-wheeler category though in green has witnessed a softer recovery as rural market is taking time to get back from post-covid stress. Commercial vehicle segment has seen a staggering growth over last year, though on a very low base as there were product shortages due to BS-VI transition.

Overall, the Industry is still not out of the woods. When compared to June 2019, we are still in red by -28% with 3W and CVs taking the max hit as they are down by -70% and -45% respectively. Only Tractors continue to grow as it was up 27% compared to June 2019.”

The FADA chief thanked the government of India and previous MSME Minister, Nitin Gadkari for bringing the entire auto retail under the ambit of MSME. FADA says this will definitely help auto dealers in multiple ways, may it be lower cost of financing or lower utility rates to name a few.

Near-term outlook remains cautiously optimistic
The apex dealer body says it expects the positive momentum from June to carry forwards to July. With southern India opening up, it expects further pickup in demand. On the long-term view, it says “auto industry is yet to see retail numbers comparable to FY 2019.”

In addition, the continued global semi-conductor shortage is impacting demand – supply mismatch is thus restricting the growth of passenger vehicles. On one hand, while the new virus mutants and a prediction of third wave of Covid-19 in August is effecting sentiments, the revival of monsoons in July after a pause of 2 weeks and a better vaccination drive rate continues to build some hope.

“We will therefore have to wait and watch how the overall economy shapes up over the next couple of months. We hence see demand to be a mixed bag and hope that recovery is back on track by the time Navratri and Diwali knocks our door,” concludes Gulati.