The Federation of Automobile Dealers (FADA) said the chip shortage looks less likely to ease in the next two quarters and as a result, passenger vehicle sales are likely to stagnate going ahead.

Hyundai vehicles inside /neeraz chaturvedi
Money Automobiles Thursday, October 07, 2021 - 18:35

India's overall vehicle retail sales on a sequential as well as year-on-year basis in September 2021 was dented due to lower production due to semiconductor supply shortages and a longer waiting period. Data released by the Federation of Automobile Dealers Associations (FADA) on Thursday, October 7 showed a fall of 5.27% in September 2021 compared to the same time last year. The vehicle retail sales fell to 12,96,257 units last month from 13,68,307 units sold during the corresponding month of 2020.

Similarly, last month's overall retail sales figure, when compared to the September 2019 (pre-pandemic) period, showed a decline of 13.50%. In September 2019, the overall vehicle retail sales stood at 14,98,585 units. Segment wise, passenger vehicle (PV) retail sales rose 16.32% during the month under review from the level of September 2020. The PV retail sales rose to 233,308 units last month from 200,576 units sold during September 2020. 

“As we enter the core of this year’s festive season, the full blown semiconductor crisis continues to create hindrance in PV sales as vehicle inventory at dealers end dip to record lows of 15-20 days during the current fiscal. With high demand in this segment, the long waiting period continues to frustrate and keep enthusiast buyers in a fix,” said FADA President Vinkesh Gulati. 

FADA said the two-wheeler (2W) category continues to play spoilsport as the entry level segment is yet to witness healthy growth. “This segment’s performance is now becoming critical for the overall 2W to come back on the path of recovery as dealer inventory rises to 30-35 days in anticipation of a good festive season. Semiconductor shortage has also started impacting the 150+ cc segment,” Gulati added. 

The three-wheeler (3W) segment is now showing clear signs of a tactical shift from ICE (Internal Combustion Engine) to EVs (electrical vehicles) as the ratio has hit a 60:40 split. With offices and educational institutions slowly opening up, electrification of 3Ws will gather a greater momentum in the months to come, FADA said. 

FADA said with India entering the 42 days festive period beginning today, the near term outlook for this year’s festive season will be a mixed bag. While dealers have increased their inventory in the 2W category, PV inventory is at the lowest during this financial year due to the ongoing semiconductor crisis. 

FADA stated that the chip shortage looks less likely to ease in the next two quarters. As a result, PV sales are likely to stagnate going ahead even though original equipment manufacturers (OEMs) are coming ahead with new launches to keep the customer excited. “With skyrocketing fuel prices and a drop in purchasing power, entry level customers in rural India are keeping themselves away from fulfilling their mobility needs,” FADA noted. 

Pointing out that India’s vaccination drive has reached a remarkable momentum, the dealers association said, “This coupled with a less likelihood of a third wave in near future and offices and educational institutions opening up in a phased manner, we anticipate a marginal recovery process to begin in the 2W space.” FADA has requested all 2W OEMs to roll out special promotion schemes so that it can springboard 2W retails for a faster recovery. 

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