January auto retail sales in red, but FADA sees green shoots of recovery

January 2022 has started on a negative note for India auto retail sales, but the optimism is high. The industry saw sales declining  10.69 percent YoY at 1,439,747 units compared to 1,612,130 units in January, 2021. The December, 2021 sales were at 1,558,756 vehicles. The decline was mainly due to semiconductor shortage and muted retail sentiment.

Vinkesh Gulati, president, FADA said, “Inspite of good demand, passenger vehicle continues to face the brunt of semiconductor shortage resulting in void of a healthy inventory. Coming to two-wheeler category, the rural distress coupled with price rise and omicron wave played a villain’s role for this segment.”

Gulati added that with a revival in economy, the CV segment continues to show YoY growth especially in HCV category. With increased infrastructure spending by the Central and  state governments, the overall CV segment is seeing some momentum. “In fact, 55 percent dealers in our internal survey said that they lost more than 10 percent sales due to the Omicron wave.”

Signs of improvement
According to the FADA chief, as India gets resumes more normalcy post the 3rd wave of Covid, he expects that auto retail sales will turn positive. “

The semi-conductor shortage is also showing some signs of easing as many PV OEMs are now assured of better dispatches.

With regard to the budget, Gulati said the government’s decision to develop 25,000km of new highways will be a boost to CV sales.  Added to this, some traction is also being witnessed in replacement demand after a period of two years. Rural India has generally been a key driver for two-wheeler and entry-level passenger vehicle segment.

With government’s plan for Rs 2.3 lakh crore direct payments as MSP to farmers, it may work as a booster for the two-wheeler, tractor and entry-level PV sales. The upcoming marriage season will also trigger some demand revival for the two-wheeler segment. Overall, FADA changes its outlook from ‘negative – neutral’ to ‘neutral’ for the next couple of months,” said Gulati.