Auto retail shows signs of recovery in June, industry expects further improvement in July

Automobile retail showed signs of recovery in the month of June due to pent-up demand as the state-level lockdowns receded and showrooms slowly reopened, raising expectations of better sales in July.

Retail sales of vehicles, as indicated by vehicle registration numbers, were up 23% over June 2020 albeit on a low base. Sales had been heavily impacted last year due to Covid-19. Compared to June 2019, vehicle registrations were down by 28%.

Registrations of passenger vehicles (PV) and two-wheelers were up 43% and 17%, year-on-year. Commercial vehicle (CV) registrations were up 236%, but that was due to an extremely low base of last year. Three-wheeler registrations improved 22%, on-year.

Tractors, which have been the only automobile segment to perform well through the pandemic, registered a y-o-y sales growth of 14% in June. Tractors were also the only segment where registrations were up when compared to June 2019.

The data are compiled from the road transport and highways ministry’s VAHAN portal by Federation of Automobile Dealers’ Associations (FADA). The data are incomplete and include only 1,295 out of 1,498 RTOs in the country as some states are yet to migrate to the VAHAN platform.

“Overall, the industry is still not out of the woods,” said Vinkesh Gulati, president of FADA. “Every day there is an improvement in walk-ins at showrooms. However, it is not at normal levels yet.”

The industry is poised for much better sales in July as demand improves even in the southern and rural parts of the country after tepid demand from these quarters in June, Gulati said. While PV and tractors show good signs of recovery, two-wheelers have been slower on the recovery path. Demand for CVs and three-wheelers continues to be under pressure.

During the month, PV manufacturers replenished the inventory at showrooms after stocks were running low in March and April. A sharp demand growth coupled with production shortage due to unavailability of parts had made the perfect recipe for a supply constraint just before the onset of the second wave of Covid-19.

The average inventory with car dealers was between 30 and 35 days at the end of June, up from 15-17 days at the end of April, as per a survey by FADA. Industry norm is to hold about 30 days of inventory.

However, long waiting periods for a new car will continue for some time as dealers are still clearing order backlogs and new bookings are going on to waitlists, Gulati said.

Two-wheeler inventory dipped during the month to average between 20 and 25 days. Two-wheeler manufacturers had resumed production much later in the month after taking a production holiday when coronavirus infections were peaking in the country.

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