BUSINESS

Retail vehicle sales grow for first time in FY21 on pent-up demand: FADA

Domestic retail vehicle sales across categories grew for the first time in the current financial year in December with registrations rising 11% year-on-year (YoY) to more than 18.44 lakh, driven by a double-digit growth in sales of passenger vehicles (PV) as well as two-wheelers, according to data released by Federation of Automobile Dealers Associations (FADA) on Monday.

While retail sales of PVs grew 24% last month, sales of two-wheelers were up by almost 12% mainly due to spillover of festive demand coupled with consumers advancing purchase decisions following price hikes announced by most manufacturers January onwards.

However, the dealers’ body expects demand in January to be ‘bleak’ for PVs on account of price increases and supply-side issues.

As per the data, PV sales rose 24% to more than 2.71 lakh, while two wheeler sales increased by almost 12% to 14.24 lakh. Commercial vehicles (CV) sales continued to drop, falling by 13.52% to 51,454 units. The tractor segment continued to see positive sales growth with an almost 36% increase to 69,105 units.

“Automobile registrations for the first time witnessed YoY growth in this financial year,” said Vinkesh Gulati, president, FADA.

Good crop season

“A good crop season, better offers in the two wheeler segment, new launches and a fear of price increase in January kept the demand going,” he added.

However, supply side issues in PVs continued for the second straight month, pushing waiting period for select models to as high as eight months, he added.

On the near-term outlook, FADA said, demand for vehicles in January appeared to be ‘bleak.’

“PVs may witness growth if demand-supply mismatch is resolved. With recent hikes announced by all OEMs, FADA expects a temporary blip in demand as customers will take time to absorb the same.”

Hope for CVs

The dealers’ body added that with the gradual opening of educational institutes and colleges, demand for two wheelers should slowly start coming back, while the government’s approval for Rs. 12,000 crore worth infrastructure projects would have a positive effect in the CV space.

“Though full recovery is only expected in all the segments of the industry April 2021 onwards, with no further price-hike shocks, demand-spurring Budget by the Central government, COVID-19 vaccine’s effectiveness to fight the current and the new strain of virus with no/minimal side effects, FADA remains guarded in its optimism for auto sales during the last quarter of this fiscal year,” it said.