Home / Industry / Manufacturing /  BS-VI norms, chip crunch may hit PV sales in March

New Delhi: Festive demand in March may not help boost car sales much as dealers grapple with patchy supplies of vehicles compliant with the new BS-VI phase-II norms, continuing chip crunch and the Holi festival falling in the middle of a working week.

Navratri in March-April is traditionally the second busiest period for automotive sales after the main festive season of October-November. However, this time, passenger vehicle sales are likely to grow at a more tepid pace, dealers said.

“Production of PVs was regularly in the ballpark of 320,000-340,000 units per month. But in January and February, production had dropped to 325,000 units in January and only about 300,000 in February. So, while production has gone up, year-on-year, we can see that the numbers have dropped sequentially as OEMs are approaching production cautiously in the wake of the new regulatory norms. This is affecting product availability," said Vinkesh Gulati, director of United Group.

While supply chain challenges have compounded due to the scarcity of electronic parts, demand for newly-launched vehicles and SUVs continues to grow at a moderate pace, even as pressure on the entry-level car segments remain.

Carmakers are offering discounts on entry-level models and popular models such as Kia’s Seltos SUV to exhaust stocks before the new-generation facelift is launched.

“Dealers are under pressure to liquidate all BS-VI phase-one stocks within this month, so we do expect sales to rise by 15-20% in March compared with February and in the area of 10-12% on a year-on-year basis. Because of the Navratra week starting in March, we will be able to sell in good volumes without having to discount too much," Gulati said.

“March has multiple festivals such as Holi, Ugadi, Gudi Padwa and Navratri. This will help push auto sales. Apart from this, better availability of vehicles, the change in on-board diagnostic norms from April, which will increase vehicle prices, the industry may see schemes being rolled out by the OEMs, thus aiding higher sales," the Federation of Automobile Dealers’ Association (Fada) said in a statement.

Vehicle registration data released by Fada showed that total retail sales of vehicles grew by 16% in February.

Sales of two-wheelers, three-wheelers, passenger vehicles, tractors and commercial vehicle sales rose by 15%, 81%, 11%, 14% and 17%, respectively.

Meanwhile, two-wheeler demand, which has been severely hit, is in a recovery phase.

“Demand in two-wheelers is recovering; it is not growing—we are still to capture the [5 million] or so units deficit we have from our peak pre-covid-19 levels before the sector can start growing," Gulati told Mint.

Auto dealers are taking a cautious view of demand despite long waiting periods for passenger vehicles as macroeconomic indicators suggest a slowdown in rural spending.

“India’s chief economic adviser said that urban demand recovery is taking place at a faster pace than rural. This, along with a sharp slowdown in private consumption expenditure to a two-year low, suggests a softening in household spending demand amid inflationary pressure as post-covid pent-up demand starts to fade," Fada said.

Alisha Sachdev
Alisha Sachdev is an assistant editor with Mint based in Delhi. She reports on the auto and mobility sector, with a special focus on emerging clean mobility technologies. She also focusses on developing multimedia properties for Mint and currently hosts the 'In A Minute' series and the Mint Primer podcast. Previously, she has worked with CNBC-TV18 and NDTV.
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