December 2020 has finally brought some cheer to the beleaguered Indian automotive industry, which has been in negative territory for a long time. For the last month of the troubled year 2020, the automotive industry reported overall retail sales of around 1,844,143 units, which is 11 percent higher compared to December 2019, and a percent higher than November 2020. However, it remains to be seen if the momentum can be maintained in 2021. Challenges like slowed-down supply of semiconductors and some yet-to-be-resolved supply chain issues could also prove to be sales speedbreakers .

“Automobile registrations for the first-time witnessed YoY growth in this financial year by growing 11% in the month of December. A good crop season, better offers in 2W segment, new launches both in PV as well as 2W and a fear of price increase in the month of January kept the demand going. Supply side issues in passenger vehicles continued for the 2nd straight month thus making waiting period as high as 8 months in select OEM vehicles,” said Vinkesh Gulati, president, FADA.

The apex retail body said that the CV segment continues to see demand pressure even though on YoY basis the segment fell by 13.5 percent due to lower base. Increased intra-city goods movement continued to help SCV’s outperform M&HCV segment as the revised axle load norms, increased fuel and vehicle cost and higher freight rates continued to play spoilsport.

Interestingly, tractor sales continued to outshine supply for the sixth straight month, which “further confirmed the fact that Bharat carries on to lead India’s economic recovery,” added Gulati.

He further said the apex body aims to continuously bring transparency in auto retails. “FADA for the first time is releasing a further split in vehicle registration data by introducing small, medium and heavy commercial vehicle registration details under the commercial vehicle category. This will not only help in understanding commercial vehicle data better but will also help all the stakeholders viz, suppliers, OEMs, banks/NBFC and dealers get real time demand status thus helping them in better planning.”

Price hikes may lead to temporary blip
The month of December saw good spill over demand continuing from festive season and pre-buying due to price hike announcement, but the demand for “vehicles in January looks to be bleak. PVs may witness growth if demand supply mismatch is resolved. With recent hikes announced by all OEMs, FADA expects a temporary blip in demand as customers will take time to absorb the same,” said Gulati.

With India gearing up for the vaccination drive, FADA expects this will lead to more mobility, restoring life back to normalcy and business as usual. With gradual opening up of educational institutes/colleges, the organic demand for two-wheelers should slowly start coming back.

The government’s recent approval for Rs 12,000 crore infrastructure projects is expected to see positive effects in the CV space, though full recovery is only expected in all the segments of the industry from April 2021 onwards.

With no further price hike shocks, demand spurring budget by the central government, Covid vaccine’s effectiveness to fight the current and the new strain of virus with no/minimal side effects, FADA remains guarded in its optimism for auto sales during last quarter of this fiscal year.

In terms of average inventory for the passenger vehicle segment is in the range of 15-20 days, while two-wheeler is at 30-35 days respectively.