The June vehicle retail data released by the Federation of Automobile Dealers Associations (FADA) notes that vehicle sales in India is trudging towards recovery in the post-pandemic world, albeit that the industry showed de-growth of 9% when compared to the same period in 2019. "Auto retail for the month of June 2022 continued to show its positive run when compared with June 21, a month which continued to face the brunt of Covid-19. When compared to June 2019, a pre-Covid month, overall sales were down by 9%," says Vinkesh Gulati, president of FADA.
According to data released by FADA, in June, while passenger vehicles and tractors—which were already above pre-pandemic levels for last few months—grew by 27% and 40% respectively, the commercial vehicle sales witnessed a growth of 4%, compared to June 2019, for the first-time post-pandemic. "This shows recovery is slowly creeping in for this segment. Bus segment, along with LCVs, are showing good traction," mentions Gulati. While the commercial vehicle sector joins the other two sectors whose convalescence post the upheaval by the pandemic is worth rejoicing, the two and three-wheeler segments—which form the bedrock of mobility in India—paint a sullen picture in India’s growth story on roads.
"While the three-wheeler segment narrowed its de-growth and was down at 6%, it's the two-wheeler segment which still remains the biggest cause of concern and is not picking as per expectation. The same was down by 16%," says Gulati. Rural India makes up a significant market for two-wheelers, and the underlying factors which influence demand is unenviable. "Poor market sentiment, especially in rural India, high cost of ownership, inflationary pressure and June generally being a lean month due to rains kept two-wheeler sales at low speed," he adds. In three-wheelers, Gulati attributes that the disruption in the segment by electric counterparts has deterred sales. "Apart from this, permit issues and frequent price increase remained the biggest dampeners," he adds. Gulati had earlier said that the EV disruption in the three-wheeler segment has made such deep inroads that it has irrevocably impacted the market share of the ICE-powered three-wheelers.
However, the passenger vehicle segment continues to outshine with robust growth. "An increase in wholesale sales clearly shows that semiconductor availability is now getting easier. Waiting period, especially in compact SUV and SUV segment continued to remain high," explains Gulati. He also notes that the slew of new launches that recently happened is continuing to see robust booking. "This reflects a healthy demand pipeline," he adds.
FADA has flagged the inflationary environment that exists currently as a cause for concern, in the wake of the Russia-Ukraine conflict. "The Russia – Ukraine crisis has increased inflationary pressure world over. The RBI Governor, during the recent Monetary Policy meeting, has also flagged high inflation as a major cause of concern," reads the note from FADA. The inflationary environment has also taken its toll on the disposable income in India—as in the past few months, prices of almost all essential items have moved northwards, thereby putting pressure on the common man's household budget. This has happened in tow with inflated fuel prices, which has affected the two-wheeler buyers the most, since the segment is generally dominated by first time buyers. On the other hand, the ease in availability of semiconductors will see increased supply especially in the passenger vehicle segment, and thus, reduce waiting periods. To sum up, FADA posits that if rural India stabilises, auto retail will enter the festive season on a good note.
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