The Federation of Automobiles Dealers Association (FADA) has announced the monthly vehicle registrations for October 2020. FADA reports that demand for new vehicles was on the up month on month by 5.11% since September 2020. However, year on year, the story is still not great for the auto industry. Compared to October 2019, FADA reports that vehicle registrations fell by -24% in October 2020. Apart from the tractor industry, all other sectors saw a sharp decline in registrations.
Year on year, 2-wheeler registrations were down by -26.82%, three-wheelers sharply by -64.5% and commercial vehicles were down by -30.32%. Passenger vehicles on the other had fared not as poorly, but new registrations in the sector saw degrowth of -8.8%. The tractor industry has been the only sector that has seen steady growth in the recent past. The sector grew by a whopping 55.53% in terms of new vehicle registrations. FADA says that the Government’s continued procurement of Kharif crops at MSP from farmers is leading to a higher disposable income in rural India.
In 2019, Navratra and Diwali festive events were both took place in October. In 2020, Navratra was the only major festival while Diwali is scheduled in November. FADA claims that due to this, registrations did not show positive growth. FADA says that with the final leg of the festive period inbound, customer walk-in’s have improved in dealerships, however, “healthy conversions are yet to see the light of the day”.
Dealer inventories are being reported to be at its newest highs this financial year for the 2-wheeler and passenger vehicle sector. FADA has requested all OEMs, especially the two-wheelers to assess the current inventory and curb production accordingly.
Vinkesh Gulati, FADA President stated that entry-level motorcycles witnessed a lean demand in the 2-Wheeler segment. For passenger vehicles, most dealers ended with a limited stock of high selling items and odd variants which did not attract much demand. In addition, the lower discount rates compared to last year’s festive season also did not help boost sales.
For the ailing commercial vehicle sector, FADA continues to push for an attractive incentive based Scrappage Policy to be announced urgently. In addition, it requests the Government to release funds for infrastructure projects that would help in demand generation, thus higher production of vehicles.
In terms of outlook, customers have a sense of caution as COVID gets into its third wave in many cities. Additionally, as few European Countries have announced lockdown, procurement of spare parts will hinder a smooth supply of vehicles in India. FADA claims this would lead to a supply mismatch and reflect in passenger vehicle sales negatively.
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