FADA Warns of a Lacklustre Festive Season for Dealers of Passenger Vehicles
Moneylife Digital Team 07 September 2021
Federation of Automobile Dealers Associations (FADA) has warned of a lacklustre festive season, especially for dealers of passenger vehicles (PVs), as inventory level continues to dip due to the non-availability of the fast-moving variants.
In a release, Vinkesh Gulati, president of FADA, the apex body of automobile retail industry, says, “Until last year demand was a challenge, however, this year, supply is becoming a bigger problem due to shortage of semi-conductors, even though there is high demand for passenger vehicles. Every dealer by now starts planning for a bigger offtake in anticipation of a bumper festive. However, this time, due to supply issues, inventory levels are at the lowest.”
As per data provided by FADA, total vehicle sales increased 14.5% on a year-on-year (y-o-y) basis during August. However, last year’s sales were impacted due to the lock-downs amidst the COVID pandemic. Automobile sales, compared with August 2019, the pre-COVID month, are still down 14.8%. 
All categories registered increased sales on y-o-y basis, mainly on a lower or almost nil base. During August this year, two-wheeler (2W) sales increased by 6.7%, three-wheelers (3W) by 79.7%, passenger vehicles (PVs) by 38.7%, tractors by 5.5% and commercial vehicles (CVs) by 97.9%, data shared by FADA shows.
According to Mr Gulati, with multiple price hikes, increased fuel cost, and educational institutions remaining closed, the impact could be felt on the overall segment. 
He says, “Customers continue to fight financial battle due to COVID related health issues and hence remained away from dealerships resulting in low enquiry and lower sales. This has its impact on the entry-level segment, which continues to face the biggest brunt.”
In August, the CV segment continued to witness some recovery, mainly due to last year’s low base. “While small commercial vehicle (SCV)’s had already shown good recovery due to intracity goods movement, medium and heavy commercial vehicles (M&HCVs) are picking up pace only in specific geographies where the Indian government is rolling out infrastructure projects. Acquisition cost post Bharat stage (BS)-6 implementation, along with financers keeping away from the segment and high fuel cost continues to restrict recovery in CV demand,” the apex body of automobile retail industry points out.
According to FADA, for the first time, customers may not get a vehicle of their choice and lucrative schemes during this festive season. This is because, it says, original equipment manufacturers (OEMs) have drastically cut down production due to unavailability of semi-conductors and ABS chips, shortage of containers and high metal prices and the ultra-frequent price increase is also keeping entry-level buyers at bay. 
“Customers, especially at the bottom of the pyramid, are shifting their priority from saving instead of spending. This will keep demand for two-wheelers a concern. Though, with educational institutions slowly opening up, a ray of hope can be seen for an improved demand in the two-wheeler category in the coming months.”
FADA says the near-term outlook will continue to remain a mixed bag, with PVs witnessing demand-supply mismatch and 2W facing a demand crunch. 
As of July 2021, dealer inventory level for PVs and 2Ws remained in the range of 25-30 and 20-25 days, respectively.
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