Vehicle demand in India is expected to decline in January due to the hike in auto prices announced by all original equipment manufacturers (OEMs) and vehicle producers at the end of 2020, according to the Federation of Automobile Dealers Association (FADA). The association expects a temporary blip in demand as customers will take time to absorb the same.
India’s total auto sales in December 2020 stood at 1.84mn units, up by 11.01pc from 1.66mn units in Dec 2019, driven by a good crop season, better offers in the two-wheelers segments, new launches, festival spillover demand, and pre-buying due to the announcement of price hike in Jan 2021.
Passenger vehicle (PV) registrations in December grew by 23.99pc to 271,249 units from 2,18,775 units in the preceding year, while sales of commercial vehicles (CVs) stood at 51,454 units, down by 13.52pc from 59,497 units in the prior year.
In Dec 2020, supply issues in the PV sector continued for the second month, making the waiting period as high as eight months in select OEM vehicles. CV segment continued to see demand pressure even though it fell due to lower base, increased fuel and vehicle cost, and higher freight rates.
| India’s CV registrations in Dec 2020 (in units) | |||
|---|---|---|---|
| Type | Dec-20 | Dec-19 | YoY (pc) |
| Light CVs | 33,986 | 38,280 | -11.22 |
| Medium CVs | 2,528 | 3,018 | -16.24 |
| Heavy CVs | 11,212 | 15,361 | -27.01 |
| Others | 3,728 | 2,838 | 31.36 |
| Total | 51,454 | 59,497 | -13.52 |
Two-wheeler sales in December increased by 11.88pc to 1.4mn units from 1.2mn units in the previous year due to high demand as well as new launches in the segment.
Tractor sales in December rose by 35.49pc to 69,105 units from 51,004 units in 2019, while three-wheeler sales stood at 27,715 units, declining by 52.75pc as compared to 58,651 units in the year before.
Outlook
FADA said that PV sales may witness growth if the demand-supply mismatch issue is resolved. The rollout of the COVID-19 vaccine may help Indians in increasing their mobility, restoring life back to normalcy and business as usual.
The association also said that with the gradual opening up of educational institutes/colleges, the demand for two-wheelers is expected to slowly recover.
The Indian Government’s approval for Rs12,000cr infrastructure projects is expected to show positive effects in the CV segment, although full recovery is only expected in all the segments from April 2021 onwards, it said.
With no further price hike shocks, demand spurring budget by the government, the vaccine’s effectiveness to fight the COVID-19 without side effects, FADA remains guarded in its optimism for auto sales in the last quarter of the current fiscal year (Q4 FY21).