See 2-5% price hike in auto sector; manufacturers underestimated semiconductor shortage issue: FADA

The Federation of Automobile Dealers Association released registration data for the month of February today. In an interview with CNBC-TV18, Vinkesh Gulati, President of FADA, discussed the demand situation in the auto sector.

“We had already seen organic demand coming up since November-December. However, things are not so good in all the categories. The demand is good in passenger vehicles (PV) but for all the other categories we are not very positive,” he said.

In terms of the price hikes, he stated, “Price hike is eminent. The kind of issues we are seeing in supply chain, the increase in steel prices, semiconductor shortages – these are the times when normally original equipment manufacturers (OEMs) do increase the prices to cover the losses or cover up the cost increase."

"However, seeing the current situation of the market where except for PV and tractors all the other segments are seeing a double-digit degrowth, I feel this should be avoided.”

“If needed, there will be a small hike to cover up some part and the companies may wait for the market sentiment to go up, have a good order book in all the categories and then think of increasing the prices. Percentagewise, normally the price increase happens around 2-5 percent. So if it happens, it will be the same,” he added.

According to him, PV segment has seen better results post the lockdown. “Two-wheeler hasn’t come out well since the lockdown. We have seen better results in PVs. The biggest hit has been the latest increase in the fuel prices where there is no support. The fuel prices are expected to be on the increasing trend."

"So I feel that the two-wheeler customers are now thinking of postponing it. If the fuel price increase continues, many of them may think of not buying at all,” Gulati said.

Semiconductor shortage is a big issue, he said. “I feel somewhere our manufacturers underestimated the demand that will come after lockdown and even today the situation is similar. So, on the popular models, anything between three-four months to eight months is the waiting period,” he shared.