With major auto markets opening up and ease in restrictions of business operations, dealers in Motown got some respite to liquidate their locked inventories of April and May. As a result, the total auto retail sales went up to 1,217,151 units posting a growth of 22.62% compared to 992,610 units in the same month last year, according to the Vahan data released by the Federation of Automobile Dealer Association (FADA).
However, it is to be kept in mind that the jump in retail sales can be attributed to the low base of June’20 and pent-up demand from April and May this year. However, the retail sales in June’21 are 28.32% lower than the pre-pandemic period of June’19.
FADA expects positive momentum from June to be carried forward to July. Furthermore, with southern India opening up, it is anticipated that demand to pick up.
Vinkesh Gulati, President, FADA, said June witnessed re-opening for most of the states except the ones in the South. Due to this, the industry saw a high pent-up demand that was stuck in the system because of statewide lockdowns.
Among the different categories, June auto retail sales were primarily led by the passenger vehicle segment that registered strong double-digit growth of 43%, followed by two-wheelers with a 17% rise in sales. Interestingly, commercial vehicles posted 236% growth in June’21 retail sales because of the low base due to the non-availability of BS-VI vehicles last year.
Tractors, which has seen robust demand last year even in the pandemic, posted a 14% jump in June retail sales.
|Segment||JUN'21||JUN'20||YoY %||JUN'19||% Chg, JUN'19|
|Light Commercial Vehicle||21,650||8,428||156.88%||38,876||-44.31%|
|Medium Commercial Vehicle||2,091||78||2580.77%||4,740||-55.89%|
|Heavy Commercial Vehicle||9,575||346||2667.34%||18,880||-49.28%|
Source: Vahan Data and FADA Research
Gulati added, “while all the categories were in the green, passenger vehicles maintained good demand as customers continued to show keenness in vehicles for observing social distancing and safety of their families. The two-wheeler category, though in green, has witnessed a softer recovery as the rural market is taking time to get back from post COVID stress.”
In terms of inventory levels by the end of June’21, the average inventory for passenger vehicles ranges from 30-35 days, while the average inventory for two-wheelers ranges from 20-25 days.
Demand to be mixed bag in a couple of months
Continued global semiconductor shortage is impacting demand-supply mismatch, thus restricting the growth of Passenger Vehicles. On the one hand, while the new virus mutants and a prediction of a third wave in August are affecting sentiments, the revival of monsoons in July after a pause of two weeks and a better vaccination drive rate continues to build some hope.
“We will therefore have to wait and watch how the overall economy shapes up over the next couple of months,” said Gulati.
He added, “We hence see the demand to be a mixed bag and hope that recovery is back on track by the time Navratri and Diwali knock at our door.”