Auto industry to reach pre-pandemic highs by FY2024, says FADA

Supply chain disruptions and low demand across segments, especially two-wheelers, are expected to impact automobile retail sales in the current fiscal with the turnaround anticipated only in the next financial year, automobile dealers’ body FADA said on Tuesday.

According to the Federation of Automobile Dealers Associations (FADA), the on-going Russia-Ukraine war and China lockdown is expected to hit supplies of critical components thereby impacting the revival of the domestic auto industry.

Besides, revival of demand in rural parts of the county would also have an impact on the overall growth of the industry in the current fiscal.

“We expect the situation to remain challenging in the current fiscal with sales volumes expected to grow by single digit,” FADA President Vinkesh Gulati told reporters here.

For the fiscal year ended 2021-22, the total auto industry retail sales grew by 7.21 per cent to 1,63,75,799 units, as compared to 1,52,74,314 units in the 2020-21 fiscal.

“The near-term outlook for the Indian auto industry continues to remain a challenge as the on-going Russia-Ukraine war and China lockdown does not hint towards a smooth path. Crude is on a boil and hence fuel prices have been raised by around Rs 10. This will continue to rise and further hit sentiments,” Gulati noted.

The passenger vehicle segment is expected to witness an impact due to the disruption in precious metals and neon gas supplies which originate from the war hit zone, he added.

It will further slow the supply of semiconductors thus making waiting periods longer for the PVs, Gulati said.

“Overall, FADA remains extremely cautious in terms of any recovery in sight until the Russia-Ukraine war and China lockdown comes to an end,” he noted.

FADA anticipates the auto industry to come out of the woods and reach pre-pandemic highs by FY2024, Gulati said.

Rise in raw material costs have made Original Equipment Manufacturers (OEMs) increase the prices of their vehicles, he noted.

While there is no dent in terms of demand in the passenger vehicle (PV) segment, it is definitely going to impact the two-wheeler segment, which is an extremely price sensitive market, Gulati said.

In the last fiscal, PV retail sales witnessed a jump of 14.16 per cent at 27,26,047 units, as against 23,87,925 units in 2020-21.

Two-wheeler retail sales stood at 1,19,73,415 units last fiscal, up 3.81 per cent as compared to 1,15,33,928 units in 2020-21.

Commercial vehicle sales saw a year-on-year growth of 45 per cent, while three-wheeler sales increased by 50.32 per cent as compared to the 2020-21 fiscal.

Gulati said the increase in volumes across sectors in 2021-22 fiscal was on a low base of COVID-hit 2020-21 financial year.

In March, overall automobile retails across categories declined by 2.87 per cent to 16,19,181 units, as against 16,66,996 units in the same month last year.

PV retail sales in March declined by 4.87 per cent to 2,71,358 units, as compared to the same month last year.

According to FADA, PV sales stood at 2,85,240 units in March 2021.

“Passenger vehicles continue to see high demand and long waiting periods as semiconductor availability still remains a challenge, even though supplies slightly improved from previous month,” Gulati noted.

Similarly, two-wheeler sales declined by 4.02 per cent to 11,57,681 units last month, as compared to 12,06,191 units in the year-ago period.

“The two-wheeler segment was already a non performer due to rural distress. It saw further dampening due to rise in vehicle ownership cost coupled with rising fuel cost,” Gulati stated.

Commercial vehicle sales were however up 14.91 per cent to 77,938 units, as compared to 67,828 units in March last year.

Three-wheeler sales were also up 26.61 per cent to 48,284 units last month, as compared to 38,135 units in March 2021.

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