FADA says no festive cheer for passenger vehicle segment, low stocks dampening sentiments

The global semiconductor shortage issue has definitely ruined festive season for the auto sector. The Federation of Automobile Dealers Associations (FADA) told CNBC-TV18 that while the demand is high, but the shortage of vehicles has caused a lot of dissatisfaction among consumers.

To get a sense of the ground reality and whether other segments like two-wheelers have seen any recovery in demand at all, CNBC-TV18 caught up with Vinkesh Gulati, President of Federation of Automobile Dealers Associations.

He said, “It is the worst ever festive season a dealer or a customer can think of and we entered this festive season with the lowest of stocks, which were only 15 to 20 days. Moreover, there is no clarity on the current month’s production as well and so, as of now, the festive season is not looking very festive and it is actually looking like a lower-than-normal month.”

“Practically, on-ground reality is that fresh customers are walking in, customers intending to book cars are walking in and we don't have vehicles to give them, the kind of sentiments this festive season actually evokes in the customer is only increasing the problem for us,” he said.

He further said, “If one were to compare figures of this Navaratri to last year’s, we are already down in the passenger vehicle category by 24 percent, which we were growing regularly for the past four, five months or six months post the second lockdown. However, the semiconductor shortage and the last two months' degrowth in production has hurt us badly. More than the dealers, it is hurting the customer point, because this is the time when there is positivity and happy sentiments at home and customers want to buy passenger vehicles but they are not able to.”

“With regard to the two-wheeler segment, it is a different story. The 125 CC and above two-wheelers are still having good demand and sales are happening. However, the 150 CC and above category of two-wheelers are experiencing semiconductor issues but they are still in control. When I come to the entry-level segment of two-wheelers, that is where the biggest problem lies and the degrowth that was continuing in two-wheelers is still there.  Although there has been some hope, it is still minus 17, if I compare last year’s Navratri to this year’s. It all comes down to the entry-level two-wheelers, which are affected by the high prices of fuel on the ground,” Gulati explained.

Moreover, rural demand is yet to recover to its usual glory, as witnessed last year. So that is hurting the two-wheeler entry segment, he added.

On demand woes, Gulati said, “Demand issue is seen in two-wheeler entry-level space and commercial vehicle, heavy vehicle space and in all the rest of the spaces, we are seeing that demand is still there because of the festivals but supply remains a challenge.”

: Vehicle registrations fall 5%, two-wheelers remain spoilsport, says FADA

On the impact of price hikes on demand, Gulati said, “Today we are sitting on a waiting period of around 3 to 12 months and additionally, there has been a lot of buzz happening in the passenger vehicle segment with the new launches. The launches have good features and it has become a craze for the customers to buy new products, which we have seen in the bookings of Mahindra XUV 700 and the other new models as well.”

“So, the effect of price increase wouldn't be dampening the demand further for at least another three to six months. We cannot predict what happens later. Overall, the price increase does have an effect for around 15 days or 20 days because the customer has to arrange some more margin to get a vehicle but the demand is so high that the effect on retail would not be seen in the near-term future,” he added.

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