Retail auto sales in May 2022 doubled compared with those in the previous month; however, compared with the pre-COVID month (May 2019), auto sales are still down 10%, says the Federation of Automobile Dealers Associations (FADA).
According to FADA, the Union government's decision to reduce excise duty on fuel prices will tame inflation and boost vehicle sales, especially for two-wheelers (2W); still, the increase in third-party insurance premiums will act as a deterrent for the 2W customers to come forward and conclude their purchase decision.
As per data released by the apex body, overall vehicle registrations in May increased by 207% compared with April 2022. Registrations of 2W increased by 198%, three-wheelers (3W) by a whopping 696%, while commercial vehicles (CVs), passenger vehicles (PVs) and tractors registered a growth of 278%, 204% and 216%, respectively.
In a release, Vinkesh Gulati, president of FADA, says, "Indian auto industry during May 2022 continued its flattish run for the third consecutive month. While a year-on-year (YoY) comparison with May 2021 shows an exceptionally healthy growth rate across all categories, it is important to note that both May 2021 and May 2020 were affected by a nation-wide lockdown due to COVID. Hence, a better comparison will be with May 2019, a normal pre-covid month."
"Similar to last month, May 2022, when compared to May 2019, reveals that auto retail is still not on a growth trajectory as overall retails were down by 10%. While PV and tractors continued their positive run by growing 11% and 33%, 2W, 3W and CV are yet to show any signs of healthy run-rate, compared to pre-COVID months, as they de-grew by 14%, 19% and 11%, respectively," he added.
According to Mr Gulati, while 2W electric vehicle (EV) sales were growing rapidly, though on a low base, various fire incidents across the country in almost all EV brands has created a fear in the mind of the customer. This, coupled with supply-chain issues, has drastically decreased 2W EV sales in May from those in the previous month.
The PV segment, which has already surpassed May 2019 numbers, is witnessing huge demand. "Dealers have not been able to fulfil the same due to supply-side issues. This has not only led to an increase in the waiting period, ranging from three months to two years but is also keeping the customers frustrated. Healthy booking and single-digit cancellation show that demand may stay put even when normal supply resumes in months," the FADA president says.
While the Russia-Ukraine war continues to create a demand-supply mismatch, thus delaying the availability of PVs, the Reserve Bank of India (RBI) has warned of more inflation as the increase in wholesale prices will get passed on to the end consumers. FADA feels it will result in a lower disposable income which will, ultimately, hamper auto sales.
It says, "RBI's observation has come at a time when wholesale price index (WPI) rose by a record 15.1% in the wake of high commodity prices and the impact of the breakdown in supply chains due to the war and the strict lockdown by China. FADA hence continues to remain cautious for any further recovery in auto sales in the near term."
As of May 2022, dealer inventory levels for PVs and 2Ws remained in the range of 15-20 and 23-25 days, respectively.
FADA also informed that the transport ministry from Andhra Pradesh had joined the Vahan vehicle registration portal and its full numbers will start appearing from June 2022 onwards. Except Telangana, Madhya Pradesh and Lakshadweep, all other states and Union Territories (UTs) are now on the Vahan portal, covering 91.6% of regional transport offices (RTOs) across the country.