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Deceptive December! Auto retails decline 10% in Jan

Dealers say drop is less on account of real lack of demand and more to do with supply side constraints as manufacturers are unable to make as many vehicles as required due to a global shortage of semiconductors

twitter-logoSumant Banerji | February 9, 2021 | Updated 23:38 IST
Deceptive December! Auto retails decline 10% in Jan
PV sales saw a 4.5 per cent drop at 2,81,666 units

KEY HIGHLIGHTS

  •     Retail sale of automobiles declined by 9.66% in January at 1.59 million units after posting an 11% growth in December.
  •     Sale of passenger vehicles declined by 4.5%, two wheelers by 8.8%, commercial vehicles by 25% and three wheelers by 51.3%
  •     Tractors once again provided the sole silver lining with a 11% growth over last January
  •     Dealers say data may not represent the true picture on ground as industry is grappling with supply side constraints owing to global shortage of semiconductors

After posting a growth for the first time ever in this financial year in December, retail sale of automobiles once again slumped by nearly 10 percent at 15,92,636 units as all major segments barring tractors registered a drop in numbers. In December, sales had grown by 11 percent raising hopes that the industry had turned the corner after the disruption caused by the pandemic.

Dealers, however, say the drop is less on account of real lack of demand and more to do with supply side constraints as manufacturers are unable to make as many vehicles as required due to a global shortage of semiconductors. "After witnessing a one-off growth in December, January auto registrations fell once again by 10% YoY. The industry clearly misjudged the demand which returned post lockdown," said Vinkesh Gulati, president, Federation of Automobile Dealers Association (FADA). "Industry's under estimation 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."

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

Sale of passenger vehicles saw a 4.5 percent drop at 2,81,666 units while two wheelers registered 8.8 percent decline at 11,63,322 units, commercial vehicles at 25 percent less at 55,835 units while three wheelers declined the sharpest down 51.3 percent at 31,059 units. Sticking to the trend from the rest of the year, tractors was the only outlier with a 11.14 percent growth at 60.754 units. FADA said price hikes by all major manufacturers in the beginning of January on account of a steep increase in prices of raw materials may have also contributed to the fall.

"The recent price hike undertaken by auto OEMs also added to woos as two wheelers have become more expensive for lower- and middle-income class  class," Gulati said. "Commercial vehicle registrations were also hit due to vehicle financing still not back to normal and high BS-6 cost."

FADA gave a guarded outlook for the next few months as positives from a further opening up of the economy and optimism from the ongoing vaccination programme may be offset by high base effect from last year and the current supply side shortage. While the average inventory for passenger vehicles has come down to a low 10-15 days, and for two wheelers at 30-35 days, only 46 percent of the dealers rated the sentiment as good and just 41 percent of them expect a growth in February. 

Also read: Maruti Swift overtakes Alto to become largest selling car in 2020, Creta bestselling SUV

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