The Federation of Automobile Dealers Associations (FADA) recently released the vehicle retail data for February 2022. Commenting on how the month performed, FADA President Vinkesh Gulati said, “The Indian automotive industry during February continues to remain in red as total retails were down by -9.21% YoY and -20.65% when compared to February 2020, a regular pre-pandemic month. The two-wheeler segment is showing no signs of recovery. With the cost of acquisition continuously going north, inquiry level remained weak. As corporates and educational institutions continued operating from home, urban demand also took a hit.”
Even though the PV segment saw some launches and slight respite in supply due to better production, it was not enough to meet customer demand. Vehicle waiting period thus remains similar to what it was in last few months. While commercial vehicles are not at similar levels when compared to the pre-pandemic months, slight recovery on a yearly basis was visible majorly due to a 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.”
Near Term Outlook
With the Omicron passing away without much impact and supplies showing signs of recovery, it looked as if the Indian automotive industry was at the cusp of recovery until Russia invaded Ukraine. This will once again have ripple effects on the global automobile supply chain. Russia is one of the largest producers of rare earth metals especially Palladium, which is an essential metal for semiconductors. Ukraine on the other hand is one of the biggest producers and exporter of neon gas, which is used in the manufacturing of semiconductors. “Due the ongoing war, we once again fear a shortage in semiconductors which will create additional supply side issues for PVs,” Gulati said.
With crude breaching the USD 110 mark, the government will not be able to hold prices of petroleum products for long. Post state election results, oil marketing companies will increase fuel prices by at least Rs 10-15. “While this will act as a obstacle for two-wheeler sales, with educational institutions and offices now fully open and Gudi Padwa round the corner, we may see some increased interest in two-wheelers as well as the bus segment which has witnessed a long dry spell of almost two years,” Gulati pointed out. Till the time the Russia – Ukraine conflict doesn’t come to an end, FADA changes its outlook from ‘neutral’ to ‘negative’.