Chip Shortage, Cost of Ownership and Poor Consumer Sentiment Have Affected Sales, FADA Says
Retail vehicle sales fell 16% in December, which is usually a month of strong sales for the auto industry.
The numbers were dragged down by lower sales of passenger vehicles and two-wheelers due to continued shortages of semiconductors, high cost of ownership and lack of consumer confidence in rural areas, according to the Federation of Automobile Dealers Associations (FADA).
Total retail auto sales fell to 15.58 lakh units in December from 18.56 lakh a year earlier.
“The month of December is generally considered to be a month of high sales where OEMs [original equipment manufacturers] continue to offer the best discounts to clear inventory due to year change. This was not the case this time around, however, as retail sales continued to disappoint, ”said FADA President Vinkesh Gulati.
While sales of passenger vehicles (PV) fell nearly 11% to 2.44 lakh units, two-wheelers fell nearly 20% to 11.48 lakh.
“While the semiconductor shortage continues to be a spoiler, sales of photovoltaic panels – despite huge bookings – closed in the red. Dealers, however, have seen a slight drop in the supply of vehicles, leaving hope for improvement, ”said Mr. Gulati.
He added that in the two-wheeler segment, however, the high cost of ownership, poor rural feeling, working from home and the latest threat from the Omicron variant continued to impact sales.
Commercial vehicles grew 13.7% to 58,847 units, driven by the government’s push for infrastructure spending. Additionally, better freight rates and a lower base helped the entire segment close with double-digit growth.
Three-wheeler sales increased significantly by 59.5% to 44,288 units in December 2021. Tractor sales, meanwhile, fell 10.3% to 62,250 units.
With various state governments again announcing COVID restrictions and the resumption of work and home education will have a negative effect on auto retail, Gulati said.
“With the fear of a further increase in healthcare spending, customers are reluctant to make purchasing decisions. With IIT Kanpur predicting the peak of omicron sometimes during the first week of February, FADA therefore remains extremely cautious over the next 2-3 months, ”he added.