Auto retail sales in August 2021 continue to rise strongly across segments as the overall sales stood at 13,84,711 units, swelling to 14.48% compared to 12,09,550 units in the same month last year. However, the retail sales last month haven’t been to the levels of August 2019 (Pre-COVID) when the auto sales stood at 16,24,217 units, a decline of 14.75%. It may be noted that segments such as passenger vehicles (PVs) and tractors continue to witness strong demand on the back of positive sentiment of customers, high rural income, and increasing need for personal mobility. Both tractors and PVs continue to see robust demand as they grow by 35.98% and 31.67% in August 2019. PV dealers continue to face the problem of the supply mismatch due to a shortage of semiconductors in a few brands. Also, the non-availability of the fast-moving variants in the PV segment is a major challenge, due to which the apex body for automotive dealers, FADA, warns of a lacklustre festive season. Vinkesh Gulati, President, FADA, said auto dealers face the most challenging phase of their business career as the COVID-19 after-effect continues to play spoil-sport. “While until last year, when demand was a challenge, supply is becoming a bigger problem currently due to shortage of semiconductors, even though there is high demand for passenger vehicles,” he added. As per FADA, every dealer starts planning for a bigger offtake in anticipation of a bumper festive season, but inventory levels are at their lowest levels during this financial year due to supply issues. The 2W market is high price sensitive. With multiple price hikes, increased fuel cost, and educational institutions remaining closed, the impact could be felt on the overall segment. “Customers continued to fight financial battles 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,” Gulati added. CV segment continues to witness some recovery coming back majorly due to the low base of last year. However, while SCV’s had already shown good recovery due to intra-city goods movement, M&HCVs are picking up pace only in specific geographies where the government is rolling out infrastructure projects. Acquisition cost post-BS-VI implementation and financers keeping away from the segment and high fuel cost continue to restrict recovery in CV demand. For the upcoming festive season, 44.09% of dealers feel it will be good, while 40.4% of dealers rated it as neutral and 14.6% rated it as bad. Outlook With OEMs drastically cutting down production due to unavailability of semiconductors & ABS chips, shortage of containers, and high metal prices, customers for the first time may not get a vehicle of their choice and lucrative schemes during this festive season. In addition, 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 hence keep demand for 2-wheelers a concern. On the other hand, with educational institutions slowly opening up, a ray of hope can be seen for an improved demand in the 2-wheeler category in the coming months. Thus, FADA sees that the near-term outlook will remain a mixed bag, with PVs witnessing demand-supply mismatch and 2W facing a demand crunch.