Covid-19 financial impact trickles down to auto retail, March sales down 29%

by Autocar Pro News Desk , 08 Apr 2021

The ongoing situation in the country on the back of Covid-19 pandemic is a reminder of the grim reality that the country started facing a year ago. What was expected to be the period of recovery for auto retail is now once again threatened with the rise in the number of Covid-19 cases as well as lockdowns being announced in several parts of the country.

As per the latest retail sales data released by the Federation of Automobile Dealers Association (FADA), the month of March 2021 saw a total of 1,649,678 units being sold across segment (except for passenger vehicle and tractor sales), which is a sharp decline of 28.64 percent YoY. The retail sales are especially concerning given the fact for the same period last year there were multiple challenges (BS VI, lockdown) that translates to a comparatively low base.

Commenting on the retail sales performance, Vinkesh Gulati, president, FADA said, “Auto registrations for the month of March witnessed double digit fall to the tune of -28.64% YoY, in spite of 7 days of lockdown last year. Tractors and passenger vehicles were the only 2 categories, which saw healthy double-digit growth. This growth can be associated with multiple factors like low base of last year, transition from BS IV to BS VI and India going under total lockdown. Global shortage of wafers which is an input for semiconductor, continued to linger around and kept PV waiting period as high as 7 months. According to FADA Survey, 47% PV dealers said that they lost more than 20% sales due to supply-side constraints.”

Two-wheeler sales sees steepest decline
According to the auto retail body the tractor segment continued its dream run as rural income saw improvements after successive monsoons and good rabi produce. With the country expected to witness a normal monsoon for the 3rd year in a row, tractor sales are further expected to perform well in FY 2021-22.

FADA says according to Pew Research, the financial woes brought by Covid-19 have pushed about 32 million Indians out of the middle class, undoing years of economic gains. This had its impact on two-wheeler sales as it saw one of its steepest de-growth in last few months. This coupled with high fuel prices and price increase acted as double whammy. It not only created a havoc in entry level customers mind but also kept them away from visiting showrooms.

In terms of the three-wheeler market, FADA says it is witnessing a tactical shift from ICE to EV’s. While prices of vehicles are increasing due to BS-VI and metals prices, customers coming from lower income category are not able to repay EMI’s due to poor income. This coupled with social distancing norms and educational institutions still closed are keeping riders away.

On the other hand, commercial vehicles continue their march into the negative territory on YoY basis. “The cost of BS-VI vehicles, low finance availability, repayment pressure due to moratorium period getting over, were the few reasons for non-performance. The category showed growth in some markets/sub-categories where the government infrastructure spending has begun. Bus segment continued to suffer due to ongoing Pandemic,” said Gulati.

Lockdown could hamper recovery
Sharing the near-term outlook, FADA says the month of April sees festivities like Ugadi, Gudi Padwa, Baisakhi and Poila Boishakh and is coupled with marriage season which generally translates to a high sales period. At this juncture, the second wave of Covid is not only spreading faster but is also trying to destabilise the growth which India has been able to achieve in last few months.

The retailer body says that any lockdown at this point will severely hamper the momentum which is getting built for auto industry to come out of the woods. Increase of Covid and fear amongst consumers with last year’s sight in mind has started keeping them away from making high ticket purchase. The effects of the same can be seen in two-wheeler category where inquiry levels are low. This coupled with semiconductor shortage will continue to hamper not only passenger vehicles but also two-wheelers as ABS shortage is currently ringing alarm bells.

As Maharashtra contributes 10-11% of the auto retail, the current lockdown is expected to have a catastrophic effect on overall sales for the month of April.

FADA says on the overall it maintains extreme caution for the month of April as Covid rises to newer highs.

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