Motown: November Blues

Automobile retail in the country continued to lag yesteryears last month as a variety of reasons, from tepid demand for two-wheelers to a global semiconductor shortage, hurt business.

Vehicle registrations — a good proxy for retail in a market where vehicle makers mostly report only factory despatches to dealerships and not actual retail sales to consumers – declined 3% year on year in November. When compared to the pre-Covid period of November 2019, registrations were down 20%, according to data from the road transport and highways ministry’s Vahan dashboard put together by Federations of Automobile Dealers’ Associations.

The data is incomplete because one-tenth of the regional transport offices in the country are yet to migrate to the online platform, but the numbers paint an accurate picture in terms of trends.

Car sales had improved year on year in November last year, giving a high base for comparison this year. The segment recorded a 19% year-on-year decline in registrations last month.

Two-wheelers, which account for over three-quarters of the vehicles sold in India, just managed to match last year’s sales. However, the base was low compared to preceding years.

Commercial vehicles and three-wheelers logged growth in registrations in November at 13% and 67% year on year, but this again was on a significantly low base due to tepid sales last year on account of Covid-19.

Tractor sales dipped 8% year-on-year on a high base of November last year. Registrations were just above that recorded in November 2019.

“PV (passenger vehicle/car segment) continues to face the brunt of semiconductor shortage,” FADA president Vinkesh Gulati said.

The semiconductor shortage meant that customers had to wait for several weeks for their new car. The wait period is a year in some extreme cases, industry officials said.

Dealers are running on a low inventory of passenger vehicles at just 10-15 days on average, compared to the industry norm of holding at least a month of stock.

“While the new launches are keeping customers’ interest high, it is the lack of supply which is not allowing sales to conclude,” Gulati said.

While supply is the missing piece of the puzzle for the PV segment, it is demand for the rest of the market.

Two-wheeler sales have been low for several months now owing to tepid rural demand, many education institutes and offices sticking to remote work, sharp price hikes over the last couple of years, and triple-digit fuel prices. This has been especially pronounced in the entry level two-wheeler market.

Two-wheeler dealers are holding about 30-35 days of inventory, slightly higher than the industry norm.

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