The Indian Auto Industry continues to be in red as it reported another month of falling sales. According to the press release from FADA, the overall vehicle sales witnessed a drop of 9.21% in February 2022 on a YoY basis, while it fell by almost 21% compared to February 2020.
Although the 3W segment has seen a growth of 16.64% and the CV segment seeing a 7.41% rise in sales on a YoY basis, it is the 2W, PV and the tractor segment that pulled the overall vehicle sales as the segments saw a drop of 11%, 8% and 19% respectively.
While the situation seemed to be on track as manufacturers could deal with the chip crisis, it was not enough to meet the customer demand as the waiting period remained the same as the last couple of months.
Vinkesh Gulati, President, FADA, said that the 2W segment, in particular, is taking a significant blow due to the cost of acquisition continuously going north, eventually reducing the inquiry levels. As corporates and educational institutions continued operating from home, urban demand also took a hit.
FADA noted that with educational institutions and offices now fully open and Gudi Padwa round the corner, “we may see some increased interest in 2- wheeler as well as the bus segment,” he said.
“While commercial vehicles are not at similar levels when compared to pre-COVID months, slight recovery on yearly basis was visible majorly due to low base effect. This coupled with increase in government’s infrastructure spending saw continued traction in HCV and Tipper segments. Fleet operators who were earlier being missed have slowly started purchasing vehicles,” he said.
The dealers' association further noted that with omicron passing away without much impact and supplies showing signs of recovery, it looked as if the Indian auto industry was at the cusp of recovery.
However, things are changing drastically due to Russia’s invasion of Ukraine. This will once again have ripple effects on the global automotive supply chain, it noted.
Russia is one of the largest producers of rare-earth metals, especially Palladium, which is essential for semiconductors. Ukraine, on the other hand, is one of the biggest producers and exporters of Neon Gas, which is used in the manufacturing of semiconductors. Due to the ongoing war, the shortage of semiconductors will create additional supply-side issues for PVs.
Additionally, with crude breaching the $110 mark, the government will not be able to hold prices of petroleum products for long, which act as an obstacle for 2-wheeler sales.
Accordingly, FADA changed its outlook from ‘neutral’ to ‘negative’ until the Russia – Ukraine conflict ends.