Retail auto sales fall 10.7% in January, govt spending on infra, MSP to boost vehicle demand: FADA

However, three-wheeler and commercial vehicle sales went up by 30 percent and 21 percent, respectively, in January.

While commercial vehicles, especially heavy commercial vehicles, continued to perform well in pockets, two-wheelers continued to show weak performance due to rural India remaining in distress.

Private vehicle inventory continued to remain at historic low of 8-10 days, while two-wheeler inventory reduced from alarming levels to 25-30 days.

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Commenting on January performance, FADA President Vinkesh Gulati said,“The month of January continues to show weak performance as overall retails on a YoY basis, fell by 10.7 percent, while there-wheelers and CV continues to remain in green with a growth of 30 percent and 20.5 percent, two-wheeler, PV and tractors closed in negative with degrowth of -13 percent, 10 percent and 10 percent, respectively. Auto retails weak performance of 18.4 percent compared to January’20 (a pre-covid month) continues to show that India is yet to recover from the covid effect which gripped the world 2 years ago.”

Despite good demand, passenger vehicles continued to face the brunt of semi-conductor shortages, resulting in a fall in inventory.

According to FADA, Union Budget 2022 stressed on developing 25,000 kms of new highways, which will further push infrastructure spending, thus resulting in an increase in commercial vehicle sales. Added to this, some traction is also being witnessed in replacement demand after a period of two years, it said.

Rural India has generally been a key driver for Two-wheeler and entry-level passenger vehicle segment.

With the government’s plan for 2.3 lakh crore direct payment as minimum support price (MSP) to farmers, it may work as a booster for two-wheeler, tractor and entry-level private vehicle sales. The upcoming marriage season will also trigger some demand revival for the two-wheeler segment, FADA added.

Overall, FADA has changed its outlook from ‘negative – neutral’ to ‘neutral’ for the next couple of months.

FADA gathered vehicle registration data from 1,386 out of 1,597 regional transport offices (RTOs).