India Auto Inc misjudged demand, January retail back in the red: FADA

The Indian automotive industry has started the new year with overall automotive retail sales in the red. This is despite a strong “one-off performance in December”, points out data released by the Federation of Automotive Dealers Association (FADA), the apex auto dealer body in India.

In terms of overall sales, the automotive industry reported sales of 1,592,636 units (2W, 3W, PV, CV, and tractors) a decline of 9.66 percent compared to the same period last year. Interestingly, except the tractor all segments were in red, pointing to the resilience of rural India.

Commenting on the January 2021 performance, Vinkesh Gulati, president, FADA said, “After witnessing a one-off growth in December, January auto registrations fell once again by ~10% YoY. Auto industry clearly misjudged the demand which returned post lockdown. Industry’s underestimation of post-Covid rebound along with chipmakers prioritising higher-volume and more lucrative consumer electronics market has created a vacuum for semiconductors. This has resulted in shortage in supply for all categories of vehicles especially passenger vehicles even though enquiry levels and bookings remained high. New launches and SUV’s continued to see high traction and helped in restricting the overall PV registrations fall by a bigger margin. The recent price hike undertaken by Auto OEMs also added to woos as two-wheeler have become more expensive for lower- and middle-income class. Commercial vehicle registrations were also hit due to vehicle financing still not back to normal and high BS-VI cost.”

Final contours of scrappage policy awaited
He further pointed out that the first budget stressed making India an Aatmanirbhar Bharat and finally brought some cheer for the auto industry as the age-old demand of bringing “Vehicle Scrappage Policy (voluntary) saw the light of the day. The final contours of the policy though awaited, will decide its attractiveness and popularity. This including announcement to induct more buses in public transport, increased infrastructure spending and building National Highways will play a pivotal role in reviving commercial vehicles segment over a longer period of time.”

The FADA president said during Q4 FY2021 the auto industry was transitioning from BS-IV to BS-VI, which led to huge discounts that helped higher sales and registrations. With a high-base and continued shortage of semiconductors on one hand and gradual opening of academic institutes and business as usual along with Covid vaccine’s effectiveness on the other, FADA continues to remain guarded in its optimism for auto registrations during Q4 of this financial year.