Auto sales growth stagnates in Sept as chip shortage, low 2-wheeler demand play spoilsport

Vehicle registrations with regional transport offices (RTO) – a reasonably accurate proxy for retail sales – declined by over 5% during the month, led by an almost 12% decline in two-wheeler registrations. When compared to the pre-pandemic period of September 2019, registrations were down almost 14%.

CV and three-wheeler registrations improved by a healthy 51% and 47% year-on-year, respectively, albeit on a low base. Compared to September 2019, three-wheeler registrations were still deep in the red while CV registrations narrowed the deficit to just 1.5%.

Meanwhile, passenger vehicle (PV) or car sales improved by 16% year-on-year but could have been better, dealers said. The semiconductor shortage has resulted in curtailed production of new cars and supply is far shorter compared to demand. PV registrations were up 31% compared to 2019.

“As we enter the core of this year’s festive season, the full-blown semiconductor crisis continues to create hindrance in PV sales (and) vehicle inventory at dealers’ end (has dipped) to record lows of 15-20 days,” said Vinkesh Gulati, president of the Federation of Automobile Dealers’ Associations (FADA). The shortage of vehicles was creating long waiting periods for customers, he said.

FADA put together the registration data from the road transport and highways ministry’s Vahan dashboard. The data are incomplete as only 1,347 out of 1,562 RTOs in the country are on the VAHAN platform. But they paint an accurate picture in terms of trends.

On the two-wheeler side of the market, the entry-level segment was the biggest worry, Gulati said. These include affordable commuter motorcycles which primarily cater to the economically less-privileged segment of buyers, a class whose finances were hit hard by the pandemic. Last month, the share of two-wheelers in the Indian market by sales dropped to less than 71% – one of the lowest ever.

Tractors, which have been one of the outliers in the vehicle industry and registered healthy sales even during the peak of the pandemic, were in the red during September albeit on an extremely high base of last year. When compared to September 2019, tractor sales were up by 39%.

Looking ahead, Gulati painted a mixed picture for the automobile industry.

“With India entering the 42-days festive period beginning today, the near-term outlook for this year’s festive season will be a mixed bag. While dealers have increased their inventory in the two-wheeler category, PV inventory is at the lowest during this (fiscal year) due to the ongoing semi-conductor crisis,” he said.