Festive season turns out to be worst in decade as chip shortage takes toll on retails

Automobile retail sales in the country fell 18 per cent year-on-year in the 42-day long festive period this year as semiconductor shortage impacted production across companies affecting their ability to supply adequate numbers to dealer partners, FADA said on Thursday.

During the period under review, barring three-wheeler and commercial vehicles, all other segments including passenger vehicles, two-wheelers and tractors were down as compared with the same period of last year.

As per data collated by the Federation of Automobile Dealers Associations (FADA), total retail sales across segments stood at 20,90,893 units this festive period, down 18 per cent from 25,56,335 units in 2020.

Passenger vehicle registrations stood at 3,24,542 units, down 26 per cent from 4,39,564 units in the festive period last year.

Similarly, two-wheeler sales declined by 18 per cent at 15,79,642 units this year as against 19,38,066 units in 2020.

Tractor sales were down 23 per cent at 56,841 units as compared with 73,925 units in the same period of last year.

Three-wheeler sales, however, increased 53 per cent to 52,802 units as compared with 34,419 units last year. Similarly, commercial vehicle sales rose by 10 per cent to 77,066 units as against 70,361 units in 2020.

"We have witnessed the worst festive season in the last decade. Semiconductor shortage which was already a full blown crisis showed its true colours when in spite of an above healthy demand, we could not cater to customer's need as SUV, compact-SUV and luxury categories witnessed huge shortage of vehicles," FADA President Vinkesh Gulati said.

On the other hand, entry-level cars saw subdued demand as customers in this category continued to conserve money to take care of healthcare needs and other expenses, he added.

"The two-wheeler category continues to face the brunt of low sales with the entry level category being the biggest spoilsport. The rural distress in retails coupled with frequent price hikes, triple digit fuel prices and customers conserving funds for healthcare emergencies kept the demand low," Gulati said.

In fact, customer inquiries were also ultra-lean during the period under review, he noted.

In the CV space M&HCV segment is now in a recovery mode with infrastructure projects coming up in different states, Gulati said.

Buses, however, continue to be in the slow lane as it is yet to see any revival in demand, he added.

The three-wheeler segment has started to witness normal demand with situation getting normal across various states, Gulati stated.

"It is noteworthy to mention that we are witnessing a tactical shift from ICE (internal combustion engine) to electric. The electric vehicle (EV) share in the segment has now crossed the 45 per cent mark," he added.

In October, total retail sales witnessed a year on year dip of 5 per cent at 13,64,526 units.

According to FADA, which collected vehicle registration data from 1,357 out of the 1,570 regional transport offices (RTOs), passenger vehicle registrations declined by 11 per cent to 2,28,431 as compared with 2,57,756 units in October 2020.

Similarly, two wheeler sales declined by 6 per cent to 9,96,024 units during the month as against 10,60,337 units in the same month last year.

Three wheeler sales were up 74 per cent year on year, while tractor offtakes were down 21 per cent as compared with October 2020.

FADA noted that even though the festive period is now over, there is still a huge backlog of orders in the PV segment.

"If PV original equipment manufacturers (OEMs) are able to realign supply with demand, we can still see a good year-end retail," it stated.

The dealer's body also urged the two wheeler companies to rationalise the inventory.

It also requested the companies to roll out attractive schemes for customers so that demand especially in the entry level category can be revived.