A survey conducted by ICRA has pointed towards recovering demand in select mobility segments. Majority (80%) of the two-wheeler dealers who were a part of the survey noted that the demand is weaker than the previous year. The good news for the automobile sector is that the retail demand for PVs is healthy.
The ICRA survey also found out that the demand for CVs has improved after two years of downturn. More than 50% of respondents believe that demand in PV and CV segments is better than the previous year.
Supply constraints, however, have resulted in increased waiting periods and lower inventory levels at the dealerships. 92% of PV dealer respondents indicated that waiting periods have increased compared to the last year due to supply constraints. 40% of the 2W, CV, and tractor dealer respondents have also pointed out that waiting periods increased compared to the last year. But the increased waiting periods, as per 60% of respondents, have not resulted in booking cancellations.
The automobile dealership industry, as per ICRA, has been witnessing several headwinds in the recent past, including subdued demand for 2-wheelers, supply constraints impacting the growth of passenger vehicle (PV) sales, and high base effect limiting the growth in the tractors segment. In addition, the semiconductor shortage and rising geopolitical tensions are also a dent in the supply chain industry.
Nithya Debbadi, Assistant Vice President and Sector Head, ICRA, said, “While dealership segments are witnessing varied headwinds, supply is improving on a sequential basis and demand has been improving in select segments. The stable financing environment also augurs well with improving demand. Lower inventory is expected to reduce working capital borrowings and accordingly interest costs for the dealers and support their net margins. Further, due to low inventory levels, dealer discounts have also been minimal, which has further supported earnings of dealerships. Given these supporting factors, ICRA’s outlook on the automobile dealerships is stable.”