Retail auto sales dipped 8% year-on-year in July, dragged down by tepid sales of two-wheelers and passenger vehicles, according to the Federation of Automobile Dealers Associations (FADA).

While passenger vehicle sales declined 5% year-on-year in July, the two-wheeler segment witnessed an 11% drop in sales last month. July is considered a lean month before the festive season hits in August.

"The PV segment is witnessing a dream run as retail sales are already higher than 2019. Even though there is a blip in July numbers, the industry is continuously introducing new models especially in Compact SUV segment," FADA President Vinkesh Gulati says, adding that a better supply in coming months will help in bringing down customer anxiety due to longer waiting periods.

The two-wheeler retail run witnessed poor demand as rural India continues to underperform. This coupled with high inflation, erratic monsoon and high cost of ownership continues to keep bottom of the pyramid customers at bay, Gulati adds.

July saw erratic monsoon where some states got less rainfall while others got more than required. The unfavourable weather resulted in decreased Kharif sowing as the area under paddy dipped by 13% at the end of July. Tractor sales, which were showing good growth till a month ago, hence saw a big dip in July.

Meanwhile, three-wheelers and commercial vehicle sales rose 80% and 27% respectively.

Total vehicle retail sales plunged 20% last month when compared with July 2019, a pre-Covid-19 month. Passenger vehicle and tractor sales continued to outperform by growing 19% and 7% respectively when compared with July 2019. All the other categories were in red with two-wheelers, three-wheelers and commercial vehicles falling by 28%, 15% and 4% respectively.

The three-wheeler space continued to see demand recovery even though full recovery to pre-Covid levels is still some time away, the auto industry body says. "It is clearly evident that e-rickshaws is the biggest mover in the segment. Demand recovery in the 3W passenger category also shows that Covid is now behind us as passenger movement has once again started gaining traction."

Commercial vehicle retail figures continue to witness good demand as the government's infrastructure push is helping customers in concluding their purchase. Apart from this, the bus segment also witnessed a recovery in demand as educational institutions and offices are once again back to normal mode.

The industry body, however, cautioned that the threat of semiconductor shortage is once again looming. "After the Russia-Ukraine war, the world is once again facing the threat of Taiwan-China war. Due to this, the threat of semi-conductor shortage is once again looming as chip-maker TSMC raises red flag that if war hits, Taiwanese chip manufacturers would be rendered non- operable," says FADA.

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