Auto industry sales flat for 3rd month in a row

The Indian auto industry is yet to ascend to a growth trajectory, and has continued its streak of flattish numbers, the May 2022 vehicle retail data released by the Federation of Automobile Dealers Association (FADA) shows. Compared to May 2019 (which FADA thinks is a better comparison because the preceding months of the last two years were disrupted by nationwide lockdowns), the overall retail numbers were down by 10%. Despite passenger vehicles and tractors’ unabated run of positive retail numbers—growing 11% and 33% respectively—the two, three-wheeler, and commercial vehicle segments are bereft of a healthy run-rate, vis-a-vis the pre-pandemic months—de-growing by 14%, 19% and 11%, respectively.

“The Government made a bold decision to cut excise duty on fuel prices thus reducing inflation and economic distress. While this will have a positive rub-off on sale of vehicles especially two-wheelers, the increase in third party insurance premium will act as a deterrent for some,” says Vinkesh Gulati, President, FADA. Gulati explains that the passenger vehicle segment continues to lead the road to recovery, seeing a deluge of demand which most automakers are struggling to sate—as the Russia – Ukraine conflict continues to fuel chip shortage, along with an overall demand-supply mismatch. “The segment which has already surpassed May 2019 numbers is witnessing huge demand. Dealers are not able to fulfil the same due to supply-side issues. This has not only led to an increase in waiting period (ranging from three months to two years) but is also keeping the customers frustrated,” he says. However, he avers that healthy booking and single digit cancellation shows that demand may stay put even when normal supply resumes in months to come.

FADA numbers show that while Maruti Suzuki continues to remain the largest carmaker in India, and by a distance—with it cornering about 42% market share in the industry—the second-place is a nail-biting tussle between homegrown automaker Tata Motors and South Korean Hyundai Motor, although the latter has pipped the former this month. Hyundai retailed 38,311 vehicles in May, whereas Tata Motors retailed an agonisingly close 35,345 vehicles in the same period. It is noteworthy that Tata Motors currently has made more inroads in the Indian electric passenger vehicle market space than any other carmaker operating in India, whereas Hyundai is yet to unveil its award-winning Ioniq 5 SUV. Mahindra was the fourth-largest carmaker in May—with its utility-vehicle-oriented fleet retailing 19,707 vehicles. However, the numbers also show that it is facing stiff competition from another South Korean carmaker, Kia—which retailed 17,121 vehicles. Hardeep Singh Brar, the vice president and head of sales and marketing, Kia India, has recently expressed the company’s plans to only stick to SUVs and MPVs—which the company calls “recreational vehicles”.

While passenger vehicles are witnessing an unprecedented surge in demand, the two-wheeler segment continues to slide on the slippery de-growth slope, on a year-to-year basis, despite growing from April 2022 levels. “While two-wheeler EV sales were growing rapidly though on a low base, various fire incidents across almost all EV brands has created a fear in the mind of the customer. This, coupled with supply chain issues, has decreased two-wheeler EV sales drastically from last month,” tells Gulati. Okinawa Autotech has narrowly pipped Ola Electric as the largest maker of electric two-wheelers in May—retailing 9,303 vehicles in May, whereas Ola Electric retailed 9,225 vehicles. Hero Electric continues to plummet down the order, ostensibly still impacted by supply-chain imbalance, retailing 2,850 vehicles—about a third of what Okinawa and Ola retailed.

Gulati also highlights that the commercial vehicle segment—especially buses—are showing good demand due to the re-opening of educational institutions. Looking ahead, FADA notes that while the Russia-Ukraine conflict continues to create demand supply mismatch, thus delaying the availability of PVs, the RBI has warned of more inflation, as the increase in wholesale prices will get passed on to the end-consumers. This will result in a lower disposable income, which will ultimately hamper auto sales. The RBI’s observation has come at a time when WPI Index rose by record 15.1%—in the wake of high commodity prices, and the impact of the breakdown in supply chains due to the conflict and the strict lockdown impositions by the Chinese authorities.