Passenger vehicle retail sales increase 39% in August: FADA

The Federation of Automobile Dealers Associations of India (FADA) expressed concern on Tuesday that the chip shortage issue might derail passenger vehicle (PV) retail sales over the holiday season, as manufacturers struggle to meet dealer demand owing to production issues.

The industry organisation described the semiconductor shortfall as a “full-blown catastrophe,” predicting a lacklustre festive season, particularly for the passenger car dealer community, due to low inventory levels and non-availability of fast-moving model variants ahead of the busy holiday season.

“As the COVID-19 after-effect continues to wreak havoc on auto dealers' businesses, they are entering the most difficult period of their careers. Even if there is a high demand for passenger vehicles, supply is becoming a greater problem owing to a semiconductor shortage, which was a concern until last year” In a statement, FADA President Mr. Vinkesh Gulati stated.

Every dealer is starting to plan for a larger offtake in anticipation of a busy holiday season, but inventory levels are at their lowest levels this fiscal year owing to supply difficulties, he noted.

“Due to a lack of semiconductors and ABS chips, a scarcity of containers, and excessive metal costs, buyers may find themselves without a vehicle of their choice and profitable schemes over the holiday season for the first time. The regular price increases are also deterring first-time purchasers” Mr. Gulati said.

Customers, particularly those at the bottom of the pyramid, were attempting to save instead of purchasing items such as two-wheelers, he noted.

“As a result, demand for two-wheelers will remain an issue. Though, with educational institutions gradually opening up, there is reason to believe that demand would improve in the coming months” Mr. Gulati explained.

According to FADA, the near-term outlook will remain mixed, with PVs experiencing a demand-supply mismatch and the two-wheeler market experiencing a demand crisis.

According to Mr. Gulati, average inventory for passenger vehicles was between 25 and 30 days at the end of July, while inventory for two-wheelers was between 20 and 25 days.

With technological advancements and new models coming with more and more electronic features such as Bluetooth connectivity and driver-assist, navigation, and hybrid-electric systems besides the engine control unit, the use of semiconductors in the auto industry has increased globally in recent times.

However, the auto sector only accounts for approximately 10% of total semiconductor demand, with the remainder coming from electronic appliances and gadgets like mobile phones and laptops, among other things.

The Federal Automobile Dealers Association (FADA) stated on Tuesday that passenger car retail sales in August increased by 39% year over year to 2,53,363 units.

PV sales reached 1,82,651 units in August 2020, according to the Federation of Automobile Dealers Associations (FADA).

Similarly, two-wheeler sales increased 7% last month to 9,76,051 units, up from 9,15,126 units the previous month.

With numerous price rises by OEMs and an increase in fuel costs, Mr. Gulati said that the two-wheeler industry, which is very price-sensitive, has remained muted.

“Customers continued to face financial difficulties as a result of COVID-related health concerns, and as a result, stayed away from dealerships, resulting in fewer inquiries and sales.

This has an effect on the entry-level market, which continues to bear the brunt of the pain” he stated.

Commercial vehicle sales increased by 97% to 53,150 units in August of last year, compared to 26,851 units in August of the previous year.

“While SCVs had previously recovered owing to intra-city commodities transportation, M&HCVs are just gaining traction in areas where the government is implementing infrastructure projects. Acquisition costs following the adoption of BS-6, as well as financers' aversion to the segment and high fuel prices, continuing to limit CV demand recovery” Mr. Gulati explained.

Last month, three-wheeler sales increased by 80% to 30,410 units, up from 16,923 units in the same period the previous year.

In August, overall sales across all categories climbed by 14% to 13,84,711 items, up from 12,09,550 units a year ago.

FADA represents approximately 15,000 car dealers with a total of 26,500 dealerships across the country.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.