The automobile industry in India continues to remain in the red overall, according to the Federation of Automobile Dealers Association (FADA) in its latest vehicle retail data report. The all-India vehicle retail registrations were down compared to February 2020 and February 2021. The year-on-year (YoY) total vehicle registrations were down by 9 percent to a total of 13,74,516.
While the auto sector was looking at a potential recovery after the third COVID-19 wave, Russia's invasion of Ukraine now threatens the global automobile supply chain once again.
The disruption in the supply of rare raw materials like palladium and rare noble gases for semiconductor manufacturing will disrupt supplies. The price of crude breaching the $110 mark, possibly going to $130 in the near future, will further complicate matters.
"Till the time the Russia-Ukraine conflict doesn’t come to an end, FADA changes its outlook from ‘neutral’ to ‘negative’," the report from the body stated.
On YoY basis, 3-wheeler and commercial vehicle retails were up by 16.64 percent and 7.41 percent on the back of tepid recovery.
Infrastructure spending by the government also contributed to the increased demand for HCVs and tippers in February. HCVs saw a recovery of 20.73 percent YoY.
But 2-wheelers continued to bear the brunt of the distress along with tractors, both suffering from some of the worst contractions.
Registrations of 2-wheelers, passenger vehicles (PV) and tractors slumped by 10.67 percent, 7.84 percent and 18.87 percent respectively. The waiting period for PVs also significantly impacts retail demand and sales. The almost inevitable hike in fuel prices that will come after the election results in five states is also going to hurt the 2-wheeler segment, but the opening up of the economy may counteract some of the pressure.
"While this will act as an obstacle for 2-wheeler sales, with educational institutions and offices now fully open and Gudi Padwa round the corner, we may see some increased interest in 2-wheeler as well as the bus segment (which has witnessed a long dry spell of almost 2 years)," the report added.
