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Dispatches of passenger vehicles increased by 13.5 % year-on-year to 252,998 units, as demand for compact cars and entry sport utility vehicles continued to rise in the rural, semi-urban and some part of the urban markets, data released by Society of Indian Automobile Manufacturers (SIAM) showed on Thursday
Dispatches of passenger vehicles increased by 13.5 % year-on-year to 252,998 units, as demand for compact cars and entry sport utility vehicles continued to rise in the rural, semi-urban and some part of the urban markets, data released by Society of Indian Automobile Manufacturers (SIAM) showed on Thursday

Despite revival in Q3, auto sector concerned about demand in the coming quarters

  • According to Kenichi Ayukawa, president, SIAM, despite the positive momentum in sales, there is a high level of uncertainty due to shortage of parts like semiconductors and commodities like steel. Hence it is difficult to predict the demand scenario for the next few months.

New Delhi: Domestic wholesale of passenger vehicles and two-wheelers increased for the fifth consecutive month in December as vehicle manufacturers increased inventory at dealerships after better-than-expected retail sales during the festival season in October and November depleted stocks at warehouses and showrooms.

Dispatches of passenger vehicles increased by 13.5 % year-on-year (y-o-y) to 252,998 units, as demand for compact cars and entry sport utility vehicles continued to rise in the rural, semi-urban and some part of the urban markets, data released by Society of Indian Automobile Manufacturers (SIAM) showed on Thursday.

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Automobile sales in India are counted as factory dispatches and not retail sales.

Indicating a sustained increase in demand in urban areas, dispatches of utility vehicles grew by 19.75% y-o-y to 94,787 units, as companies like Maruti Suzuki India Ltd, Hyundai Motor India Ltd and Kia Motors India Ltd increased wholesale of their respective sport utility vehicles to meet rising demand. Factory dispatches of passenger cars during the period rose by 8.3% y-o-y to 146,864 units.

In the two-wheeler segment, scooter sales increased by 5.59% to 323,696 units while the same for motorcycles grew by just 6.6% y-o-y to 744,237 units as demand for entry segment motorcycles softened in the rural and semi urban markets. Overall, two-wheeler sales jumped by 7.4% to 1,127,917 units.

The growth in dispatches comes as a result of low base in the corresponding period when auto makers witnessed contraction in consumer demand as a consequence of the economic slowdown and increase in vehicle prices due to change in emission and safety norms.

Despite the recovery in wholesale and retail from September, the auto industry is still cautious about the fall in volumes to almost a decade low in the April to December period due a complete wash out in the June quarter, and that supply chain constraints and increase in price of raw materials like steel and copper might derail the recovery process in the coming months.

During the April to December period, sales of passenger vehicles declined by 16% to 177,784 units, lowest since FY 2010-11, while the same for two-wheelers also dropped by 22.6% to 10,765,788 units, lowest since FY 2013-14. As a result of slowdown in overall economic activity and new load carrying norms, commercial vehicle dispatches also dropped by a massive 37.7% to 358,203 units, a level last seen in FY 2011.

According to Kenichi Ayukawa, president, SIAM, despite the positive momentum in sales, there is a high level of uncertainty due to shortage of parts like semiconductors and commodities like steel. Hence it is difficult to predict the demand scenario for the next few months.

“If we look just at the third quarter numbers, then it will be quite misleading. In the nine months period to December, passenger vehicle and commercial vehicle sales are at a decade low. While the same for two-wheelers are at a seven-year low. The industry still has to work for better volumes. The recent steps taken by the government such as the PLI scheme and low interest rates will definitely help the industry going forward," added Ayukawa.

Despite the rising cases of covid-19 and the prevailing economic slowdown, passenger vehicle makers witnessed double-digit growth in sales during the festival period after two years. Hence most of them offered reduced discounts to liquidate stocks in December.

The vehicle wholesale data for December though is in line with the retail data released by Federation of Automobile Dealers Associations on Monday.

Retail sales of passenger vehicles increased by a whopping 23.9% y-o-y to 271,249 units in December, while the showroom sales of motorcycles and scooters jumped by 11.88% to 1,424,620 units.

“Demand after the festival season has been good. Almost all OEMs witnessed good sales during November and December," added Ayukawa.

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