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‘Auto retail sales slid 16% in December’

Chip shortage, cost of ownership, poor consumer sentiment affected sales, says FADA

Retail vehicle sales declined 16% in December, which is usually a high-sales month for the automobile sector.

The numbers were dragged down by lower sales of passenger vehicles and two-wheelers due to the ongoing semiconductor shortage, high cost of ownership and poor consumer sentiment in rural areas, according to the Federation of Automobile Dealers Associations (FADA).

Total retail sales of automobiles fell to 15.58 lakh units in December from 18.56 lakh a year earlier.

“The month of December is usually seen as a high-sales month where OEMs [original equipment manufacturers] continue to offer best discounts to clear the inventory due to change of year. It was, however, not the case this time around as retail sales continued to disappoint,” FADA president Vinkesh Gulati said.

While sales of passenger vehicles (PV) slipped to almost 11% to 2.44 lakh units, two-wheelers fell close to 20% to 11.48 lakh.

“With the semiconductor shortage continuing to play spoilsport, PV sales — in spite of huge bookings — closed in the red. Dealers, however, saw slight ease in vehicle supply thus giving some hope of improvement,” Mr. Gulati said.

‘Two-wheelers hit’

He added that in the two-wheeler segment, however, high cost of ownership, bad rural sentiment, work-from-home and the latest threat of the Omicron variant continued to impact sales.

Commercial vehicles registered growth of 13.7% to 58,847 units, driven by the government’s push for infrastructure spending. Further, better freight rates and a low base helped the overall segment close with double-digit growth.

Sales of three-wheelers saw a significant increase of 59.5% to 44,288 units in December 2021. Tractor sales, meanwhile, declined 10.3% to 62,250 units.

With various State governments again announcing COVID restrictions and resumption of work and education from home will have a negative effect for auto retail, said Mr. Gulati

“With the fear of healthcare expenses rising again, customers are shying away from closing their purchase decisions. With IIT Kanpur predicting the peak of omicron sometimes in the first week of February, FADA hence remains extremely cautious over the next 2-3 months,” he added.

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