Indian Auto Industry starts 2021 with negative January sales

The year 2021 seems to have not begun on a right note for the Indian automobile industry when it comes to domestic sales. After showing a one-time YoY growth in December, 2020, January 2021 registrations once again fell by minus (-) 9.66%, according to a press release issued by the Federation of Automobile Dealers Associations (FADA).

 FADA  released the monthly vehicle registration data for January 2021.

All categories of vehicles, except tractors were in red. On a YoY basis, two-wheelers (2W), three-wheelers (3W), Commercial Vehicles (CV) and Passenger Vehicles (PV) fell by -8.78%, -51.31%, -25% and -4.46% respectively. Tractor sales continued its upbeat momentum with a YoY growth of 11.14%.

FADA has stated that the January registrations were in the negative zone because of factors like non-availability of vehicles due to scarcity of semiconductors, a fading pent-up demand and recent price hikes coupled with no festivities and auspicious days.

While dealer inventory for PVs continued to fall and came down in range of 10-15 days, inventory of two wheelers stayed put at 30-35 days.

January’21 Registration

FADA President Vinkesh Gulati said, “After witnessing a one off growth in December, January auto registrations fell once again by minus (-)10% YoY. Auto Industry clearly misjudged the demand which returned post lockdown. Industry’s underestimation of post covid rebound along with chipmakers prioritising higher-volume and more lucrative consumer electronics market has created a vacuum for semiconductors. This has resulted in shortage in supply for all categories of vehicles especially passenger vehicles even though enquiry levels and bookings remained high. New launches and SUV’s continued to see high traction and helped in restricting the overall PV registrations fall by a bigger margin.”

“The recent price hike undertaken by Auto OEMs also added to the woes as 2 wheelers have become more expensive for lower and middle income class. Commercial Vehicle registrations were also hit due to vehicle financing still not back to normal and high BS-6 cost.”

NEAR TERM OUTLOOK

FADA maintained that the finer contours of the Vehicle Scrappage Policy as announced in the Union Budget 2021-22 will decide its attractiveness and popularity. This, including the Budget announcement to induct more buses in public transport, increased infrastructure spending and building National Highways will play a pivotal role in reviving  the commercial vehicles segment over a longer period of time.

Last year, the auto industry was transitioning from BS-4 to BS-6 during Q4 FY’21. This saw huge discounts leading to higher sales and registrations. With a high base and continued shortage of semiconductors on one hand and gradual opening of academic institutes and business as usual along with Covid Vaccine’s effectiveness on the other, FADA continues to remain guarded in its optimism for auto registrations during Q4 of this financial year.

Source: FADA Research

Disclaimer:

1- The above numbers do not have figures from AP, MP, LD & TS as they are not yet on Vahan 4.

2- Vehicle Registration Data has been collated as on 07.02.21 and in collaboration with Ministry of Road Transport &

Highways, Government of India and has been gathered from 1,273 out of 1,480 RTOs.