Domestic passenger vehicle (PV) sales fell 5% year-on-year to 271,358 units in March 2022 amid chip shortage, the Federation of Automobile Dealers Associations (FADA) said on Tuesday.

Passenger vehicles continue to see high demand and long waiting periods as semiconductor availability still remains a challenge even though supplies slightly improved from previous month, said FADA president Vinkesh Gulati.

He cautioned that the Russia-Ukraine war and China's Covid-19 lockdown will further dent supplies, slamming the brakes on vehicle availability and making waiting periods more frustrating for customers.

Two-wheeler sales declined by 4.02% year-on-year to 11,57,681 units last month compared with 12,06,191 units in the year-ago period.

The two-wheeler segment which was already a non-performer due to rural distress, saw further dampening due to rising vehicle ownership and fuel costs, Gulati said.

Meanwhile, commercial vehicle sales clocked double-digit growth of 14.91% to 77,938 units in March. CVs continue to record double-digit growth when compared to last year even though the ride to pre-Covid-19 levels is still an uphill task, noted Gulati.

Three-wheeler sales were also up 26.61% to 48,284 units last month compared with 38,135 units in March 2021. The segment had earlier witnessed contraction in market size due to permit issues, closure of educational institutes amid virus outbreak and the work from home option for employees.

With India now completely opening up, the three-wheeler segment is seeing strong double-digit growth. "EVs are now contributing over 45% market share in this segment. There is also good demand for load vehicles from captive customers," said the FADA president.

Total sales across categories, however, declined by 2.87% to 1,619,181 units last month, as against 1,666,996 units in the same month last year.

"India auto retails saw a 7% rise YoY. All segments except tractors closed in positive. While 2W saw the lowest growth (due to rural phenomenon), 3W, PV and CV all saw double-digit growths," said Gulati while commenting on the financial year 2021-22 performance. "Overall full recovery is yet to be seen as auto retails are down by 25% when compared to FY20 which was largely a pre-Covid year and a year of BS-4 to BS-6 transition."

In its near-term outlook, FADA expects growth in April 2022 due to low base. The Indian auto industry continues to face challenges owing to the ongoing Russia-Ukraine war and China lockdown.

"Crude is on a boil and hence fuel prices have been raised by around ₹10. This will continue to rise and further hit sentiments on lowering the spending," said the dealers lobby, adding that an increase in raw material costs have made OEMs increase the prices of their vehicles. "While no dent in terms of demand has been seen in PV segment, it will definitely have its impact on 2W segment which is an extremely price sensitive market."

Precious metals and neon gas which comes from the war-hit country will further slow the supply of semiconductors thus making waiting periods longer for PVs, FADA warned.

Follow us on Facebook, Twitter, YouTube & Instagram to never miss an update from Fortune India. To buy a copy, visit Amazon.