Auto sales jump 11% YoY in Dec; growth registered for first time in FY21

KEY HIGHLIGHTS

• Overall automobile retail sales grew 11 percent in December, first time in a month in this fiscal.

• Growth was largely due to festival spill over demand and pre-buying due to announcement of price hike in January'21.

• Two wheelers, Passenger Vehicles and Tractor categories grow by 11.8%, 24% and 35.5% (YoY). 

• Commercial Vehicles and three wheelers declined 13.5% and 52.7% (YoY)

• Supply side challenges in PVs and price hikes may cause temporary blip in demand in next few months.

Retail sales of automobiles grew for the first time in a month this fiscal in December as the industry sold 11 percent more vehicles last month as compared to December 2019.

The figures that are collated by Federation of Automobile Dealers Association (FADA) and represent actual sale of vehicles by dealers to customers - and not dispatches from factories to dealerships as released by companies on the first of every month, shows the industry handed over 18,44,143 vehicles last month versus 16,61,245 units in the previous year. The growth was led by passenger vehicles--up 23.99 percent, tractors-up 35.5 percent and two wheelers-up 11.88 percent.  

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"Automobile registrations for the first time witnessed YoY growth in this Financial Year by growing 11% in the month of December. A good crop season, better offers in 2W segment, new launches both in PV as well as 2W and a fear of price increase in the month of January kept the demand going," said Vinkesh Gulati, president, FADA.

"Supply side issues in passenger vehicles continued for the 2nd straight month thus making waiting period as high as 8 months in select OEM vehicles. Tractor continues to outshine supply for 6 straight months further confirming the fact that Bharat carries on to lead India's economic recovery."

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The strong growth has seen a reduction of inventory levels across segments, something that will soothe the nerves of dealers. For passenger vehicles the inventory has come down to just 15-20 days while for two wheelers it is 30-35 days.    

The joy could however be short-lived. An acute shortage of some components like semiconductor chips has created supply side constraints that may impact sales this month. Further, steep increase in cost of raw materials has forced manufacturers to hike prices which may also act an as a dampener on consumer sentiment. FADA has warned that the prospects for January are bleak.   

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"While December saw good spill over demand continuing from festive season and pre-buying due to price hike announcement, demand for vehicles in January looks to be bleak. PV may witness growth if demand supply mismatch is resolved," Gulati added. "With recent hikes announced by all OEMs, we expect a temporary blip in demand  as customers will take time to absorb the same."

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