Federation of Automobile Dealers Associations (FADA) on Monday said that new vehicle registrations in October fell by 24% year-on-year due to supply issues. The industry, however, grew by 5.1% on a sequential basis.
Three-wheelers suffered the highest fall of 64% while commercial vehicles (CV) fell by 30% due to low demand aggravated by the Covid-induced lockdown. The overall economic growth of the country has a direct co-relation with a country's CV segment growth. "While small commercial vehicles are seeing robust demand due to local goods transportation back to pre-Covid levels, the medium and heavy commercial vehicles segment continued to bleed," says Vinkesh Gulati, president, FADA.
FADA said that it urges the government to announce an attractive incentive-based scrappage policy and release funds for infrastructure projects which it has awarded, as this will help in demand generation and will lead to higher production of vehicles.
When it comes to passenger vehicles, the industry saw a de-growth of 8.80% as total number of vehicle registrations fell to 2,49,860 units in October 2020 as compared to 2,73,980 in a year-ago period.
“While new launches continued to be in demand in the passenger vehicle segment, entry level motorcycles witnessed a lean demand in 2-wheeler segment. With supply side mismatch, most of the passenger vehicle dealers ended with limited stock of high selling items and odd variants which did not attract much demand. This, coupled with lower discounts, compared to last festivals also played a spoilsport," Gulati adds.
He said that although October continued to see positive momentum on a monthly basis, however, on a yearly basis the negative slide continues to increase. "The nine days Navratri period witnessed robust vehicle registrations but could not save October to go in red as compared to last year when both Navratri and Diwali were in the same month," he adds.
The only segment to show signs of growth was tractors. It grew by 55.53% and reported 55,146 registrations as compared to 35,456 in October 2019.
"The government’s continued procurement of kharif crops at minimum support price from farmers is leading to a higher disposable income in rural India. This continues to show robust demand in tractor segment which grew at a healthy 55% YoY," Gulati says.
Dealers expect November outlook to be largely flat for the industry. FADA said that it cautions both OEMs and dealers to keep a check on vehicle inventory as post festivals, demand may remain subdued. Since Inventory levels are at its highest during this financial year, it may impact dealers' financial health, thus, leading to closures and job losses, it said.
"As we enter the last leg of festivals and with Covid getting into its third wave in many cities, there is a sense of cautiousness amongst customers. Due to the lockdown announced in few European countries, procurement of spares will also be a cause of hinderance for smooth supply of vehicles in Indian markets. This will create a supply and demand mismatch, thus, affecting the passenger vehicle sales," the industry body said in a statement.