Multiple Bumps Slowing Down Auto Sales

Automobile retail in India continued to perform lower than a year earlier due to reasons like weak rural sentiment, a shortage of semiconductors, high fuel prices and a sharp increase in the prices of vehicles over the past couple of years.

Vehicle registrations with regional transport offices were down 9% year-on-year in February, hurt by a sharp drop in two-wheeler and car sales.

Automakers in India do not disclose retail sales numbers, and hence registration numbers are used as a proxy.

The demand for two-wheelers has been tepid for the past few months due to reasons like poor rural sentiment, companies allowing work from home and high fuel prices. The acquisition cost of two wheelers has gone up by more than 20% in the past two years, further denting demand.

The passenger vehicle or car segment has a totally opposite problem. There are plenty of buyers, but a shortage of parts, especially semiconductors, meant manufacturers have not been able to keep up with the demand. 

Customers may have to wait several months, and in some cases up to a year, for popular models of cars. On the commercial end of the industry, demand for three-wheelers, trucks and buses improved slightly, but on a significantly low base. Compared to the pre-pandemic month of February 2020, demand for CVs remains significantly low. 

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