FADA pins hope on rural demand to revive growth

by Nilesh Wadhwa 08 Dec 2021

If India Auto Inc was fervently hoping that a festive November would deliver the goods in terms of sales across segments, then its hopes were dashed. 

In November, overall automotive retail sales were 1,760,211 units, 3.15% lower compared to November 2020. On YoY basis, total vehicle retails decreased by -2.70%. When compared to November’ 2019 (a regular pre-Covid month), overall retails continue to fall by -20%. Tractor sales were down 9%. Interestingly, commercial vehicle sales saw improvement on YoY basis by 13%.

The “automotive retail for November continued to be in the red despite Diwali as well as marriage season in the same month. The unwanted rains in southern states further spoiled the party. Unless rural  India starts showing signs of strength, overall retails will continue to remain weak,” remarked Vinkesh Gulati, president, Federation of Automobile Dealers Association of India (FADA).

“While the two-wheeler segment saw almost at-par sales compared to last year (which itself was a bad year), overall sentiment remained low as the marriage season also didn’t help in revival except in one or two states. Apart from this, crop loss due to incessant rains and flood in southern states, high acquisition price as well as fuel costs kept the customers away. Further, there are no signs of increase in inquiry levels which is a bigger cause of concern. Passenger vehicles continue to face the brunt of semi-conductor shortage. While the new launches are keeping customer interest high, it is only the lack of supply which is not allowing sales to conclude. The extended waiting period is now starting to make customers jittery and this may lead to loss of interest in vehicle buying,” added Gulati.

Commercial vehicle segment still under pressure
According to FADA, the CV segment continues to see traction in the M&HCV segment albeit on a low base. But the bus segment is still witnessing a dry run as educational institutes continue to remain closed. With diesel prices at record highs, supply of CNG vehicles is not able to meet the demand. Furthermore, tight liquidity and unavailability of finance for customers who availed moratorium is also acting as sales barrier.

The new Covid variant ‘Omicron’ is already impacting retail sales. “This will further impact the overall vehicle demand. Educational Institutions and offices which were planning to reopen fully have once again deferred their plans and are allowing work/study from home. Price rise due to high input costs and high fuel costs are continuing to add customers woes,” said Gulati.

Expressing optimism FADA stated it is hopeful that the chip shortage will ease in times to come and therefore reduce the waiting period of vehicles and help in increasing sales. “On the 2W front, we once again request all OEMs to announce attractive schemes, which can work as a stimulus for growth in sales. FADA additionally requests them to consistently work on a 21- days inventory cycle."

"Overall, we remain extremely cautious and hope that India does not see a 3rd wave with the new Covid variant. We also urge the Central as well as all state governments to aggressively drive the vaccination coverage so that India is not caught off-guard and recovery to pre-covid levels is not derailed,” concluded Gulati.

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