Tripled year-on-year auto sales in May, but off a weak base

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Auto retail sales tripled year-on-year last month, in line with wholesale shipments, albeit on a weak base as operations were halted in May 2021 due to the outbreak of the second wave of the pandemic.

According to data available from the Federation of Automobile Dealers Associations (FADA), 1,646,773 vehicles were sold at retail last month, compared to 536,795 units in May last year. Sales were, however, around 10% lower than in May 2019 pre-Covid.

Indian automakers report wholesale shipments from factories, not retail sales to customers. Registration numbers are therefore used as an approximation of retail sales.

The number of registrations in all categories last month was much higher than in May 2020 and May 2021, when sales were weak due to the first and second waves of the pandemic, said the president of the FADA, Vinkesh Gulati.

“In May 2022, the Indian automotive industry continued its stagnation for the third consecutive month,” he said. “While the year-on-year comparison to May 2021 shows an exceptionally healthy rate of growth across all categories, it is important to note that May 2021 and May 2020 were impacted by the national lockdown due to Covid. Therefore, a better comparison will be with May 2019, which was a normal month before Covid.

Retail sales of passenger vehicles and tractors increased by 11.40% (to 263,152 units) and 33.09% (to 52,487 units), respectively, compared to May 2019. However, registrations of two-wheelers, three-wheelers and utility vehicles decreased. -13.91% (to 12.22,994 units), -19.32% (to 41,508 units) and -11.44% (to 66,632 units), respectively, compared to May 2019.

Gulati said the government’s decision to cut fuel excise duties will help keep inflation in check and boost vehicle sales, especially two-wheelers. But rising liability insurance premiums are likely to act as a drag on motorcycle and scooter buyers as they come in and make their buying decision.

“The two-wheeler segment saw a slight improvement in overall sales compared to April 22,” he said. “While sales of two-wheeled electric vehicles were growing rapidly but on a low base, various fires in almost all brands of electric vehicles created fear in the mind of the customer. This, coupled with chain problems supply, has significantly reduced sales of two-wheeled electric vehicles compared to last month.

The data was collated by FADA from the Ministry of Road Transport and Highways (MoRTH) Vahan platform. Vahan captures data from 1,481 of the country’s 1,616 Regional Transportation Offices (RTOs).

With the migration of the Andhra Pradesh Ministry of Transport to the Vahan platform, the data now reflects the records of 91.6% of RTOs in India, FADA said. Even though demand has remained strong in the passenger vehicle segment, the global automotive industry continues to witness supply disruptions, particularly of semiconductors, amid the Russia-Ukraine conflict and induced lockdowns by Covid in China, Gulati said.

The Reserve Bank of India has warned of an increase in inflation as the increase in wholesale prices will be passed on to the consumer, thus decreasing their disposable income. The Wholesale Price Index (WPI) rose a record 15.1% in April amid high commodity prices.

Customers in the passenger vehicle segment will continue to face long wait times due to supply issues, Gulati said.

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