Automobile sales boom, third wave may be deterrent: FADA

Domestic automobile retail sales witnessed a strong comeback in July this year with positive growth across all vehicle categories, Federation of Automobile Dealers Associations (FADA) said on Monday. However, the industry body cautioned that semiconductor shortage and possibility of third wave of the pandemic continue to remain a threat for the recovery of the sector.

Retail sales saw a year-on-year growth of 34% to over 15.56 lakh units last month which saw opening of dealerships across the country amid easing of COVID-led restrictions. FADA noted that even when compared to July 2019, a regular pre-covid month, “recovery is visible as the deficit reduced to low double digits of -13.22%”.

In July, passenger vehicle sales increased by nearly 63% to more than 2.61 lakh units, while two-wheelers and commercial vehicle sales were up 28% to over 11.32 lakh units and 166% to 52,130 units. Tractor sales during the month were up 7% to 82,388 units.

On the growth outlook, FADA said August started on a positive note as demand and enquiry levels continue to improve across all categories. With IMD forecasting a normal monsoon during August-September period, sowing operations will pick up gradually, which will have a rub off effect on rural sales, especially in the Tractor segment, it said.

“On the other hand, the global semiconductor shortage is now becoming a deep-rooted problem for the PV segment which is now above the pre-pandemic mark. FADA has been raising red-flag for quite some time on demand-supply mis-match,” it said, adding that the third wave of the pandemic could also put brakes on retail sales recovery ahead of the festive season.

FADA President Vinkesh Gulati said, “With the entire country now open, July saw robust recovery in retail sales across all categories… The low base effect also continues to play its part.” He added that CV’s continue to see an increase in demand especially in the M&HCV segment with the Government rolling out infrastructure projects in many parts of the country.

For PV’s, new launches and compact SUV segments helped drive demand. However, the increase in waiting period due to supply side constraints has been persisting for quite a few months and is now becoming a grave issue. According to an internal survey by FADA, 60% PV dealers said that they have at least two months waiting period for select variants, while 35% said the waiting period is more than four months for select variants.

“The 2W segment though continues to see positive demand YoY, the rate of recovery remains sluggish as customers at the bottom of the pyramid suffer with poor disposable income and rural markets where covid cases were high during the 2nd wave,” Mr. Gulati added.

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