two wheeler sales: Auto retail remains in the slow lane in December led by poor two-wheeler sales

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Vehicle retail in the country during December was lower compared to last year for the fourth straight month led by tepid demand for two-wheelers, vehicle registration data show.

Vehicle registrations with regional transport offices, which are a good proxy for retail, declined 16% year-on-year during December. Two-wheelers, the most popular mode of personal transport in India, saw a 20% decline in registrations. Sharp price increases over the past two years, high fuel costs, poor rural sentiment and work from home kept customers away from showrooms, especially in the entry-level segment.

The fear of a third wave of Covid-19 infections due to the omicron variant of the novel coronavirus further impacted consumer sentiment.

Passenger vehicle (cars) registrations were also lower this year despite robust consumer demand due to a shortage of semiconductors and a high base of last year. Meanwhile, commercial vehicles and three-wheelers fared comparatively better primarily due to an exceptionally low base of last year.

The data were put together by the Federation of Automobile Dealers’ Associations (FADA) from the road transport and highways ministry’s Vahan dashboard. The data are incomplete as only 1,379 out of 1,590 RTOs in the country are on the VAHAN platform. But they paint an accurate picture in terms of trends.

“The month of December is usually seen as a high sales month where (automakers) continue to offer best discounts to clear the inventory due to change of year,” said Vinkesh Gulati, the president of FADA. “It was however not the case this time around as retail sales continued to disappoint thus wrapping up an underperforming calendar year.”

While the supply situation slightly improved on the passenger vehicles side, it was far from normal, he said. Car dealers were running low on inventory, holding about 8-10 days’ worth of stock on average, as per a FADA survey. The industry norm is to hold about a month of inventory.

Two-wheeler dealers were holding about 30-32 days’ worth of stock.

While two-wheeler and car sales languished, commercial vehicle sales improved backed by the government’s infrastructure spending, better freight rates and expectations of vehicles price hike from this month. Three-wheeler sales too saw an improvement, but again on a particularly low base for comparison.

The dealers body has sounded caution over the beginning of what could be the third wave of Covid-19 infections in the country. During the past two waves, discretionary purchases like automobiles were the first casualty.

“Various state governments have once again announced Covid restrictions. Work and education from home have resumed and will have a negative effect for auto retail,” Gulati said.

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