The twin impact of the chip shortage and subdued demand due the pandemic has hit retail automotive off-take making Diwali 2021 as the worst in a decade, according to the apex lobby body of automobile dealers.
While demand for cars and SUVs (passenger vehicle) has been robust, actual buys by the consumers have been much below desired levels because of depleted stock. On the other hand, demand for two-wheelers has been below expectations following the pandemic.
“This is the worst festive season which Indian auto retail has seen in last decade,” Vinkesh Gulati, president of Federation of Automobile Dealer Association (FADA) said.
The passenger vehicle (PV) segment supplied only half of the industry’s retail demand during October due to the chip shortage. This has led to longer waiting period than normal, which in certain cases has stretched to nine months.
“Chip shortage is impacting supplies in PV, creating a huge shortage of vehicles in SUV, compact-SUV and luxury segments. Meanwhile, entry level PV is still seeing less demand because customers are conserving money for healthcare needs,” Gulati added.
Cost drives people away
The two-wheeler industry sales posted high double-digit contraction in October 2021 (as per the data of top six two-wheeler makers), highlighting the continuing impact of increasing cost of vehicle ownership and rampant fuel price hikes on consumer sentiments, a report from research and rating agency ICRA said.
Sarang Kanade, president (motorcycles), Bajaj Auto said, “Entry level segment has been pretty muted. The pandemic where people had to dip into their savings. This effect is petering out but it still exists.”
Two-wheeler entry level sales are still not picking up due to rural distress, high fuel prices, and people putting off high-value purchase to save for medical emergencies, Gulati added.
All India vehicle registration numbers during Navratri and Dussera, as provided by FADA, was down 16 percent in 2021 compared to the same festive days last year. Numbers for PVs were down 23 percent while two-wheelers were down 17 percent. Festive period (42 days) are the most important period for dealers because they generate one-third of sales of the year.
Dealers build up the inventory to a level of 35-40 days to address the festive season but this year inventory levels in PVs stand at mere 15-20 days. This festive season was even more important considering the industry has already gone through an adverse period during the lockdowns.
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