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Retail sales of cars and utility vehicles continued to improve in March on the back of sustained improvement in economic activity, despite the surge in coronavirus cases, and a shift in customer preference towards personal mobility to avoid covid-19 infection. A low base effect also aided the growth in passenger vehicle sales during the last month of FY21.

Showroom sales of passenger vehicles increased by 10.11% on a month-on-month (m-o-m) basis to 279,745 units during March, according to sales data released by the Federation of Automobile Dealers Associations (Fada). Sales were also boosted by the long waiting period on popular products because of a demand-supply mismatch.

Despite the improved auto sales in March, the next two months are critical in terms of how the covid situation pans out and its impact on the economy
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Despite the improved auto sales in March, the next two months are critical in terms of how the covid situation pans out and its impact on the economy

Retails of passenger vehicles increased by 28.39% from March last year, when sales came to a halt because of the lockdown measures imposed to contain the outbreak of the covid -19 pandemic. Operations had remained suspended till the beginning of May and in some cases early June.

Tractors and passenger vehicles were the only two categories that saw healthy double-digit growth and the lack of growth in other categories can be associated with multiple factors such as the low base of last year, transition from BS-IV to BS-VI norms and India going under total lockdown, according to Vinkesh Gulati, president, Fada.

“A global shortage of wafers, which is an input for making semiconductors, continued to linger around and kept the waiting period for passenger vehicles as high as seven months. According to a Fada survey, 47% of passenger vehicle dealers said they lost more than 20% sales because of supply side constraints," Gulati said.

Retails of commercial vehicles continue to show signs of a pick-up after more than two years, on the back of a faster recovery in economic activity, albeit on a low base. Showroom sales of commercial vehicles increased by 14.15% m-o-m to 63,372 units.

Two-wheeler manufacturers witnessed a 9.5% increase in retail sales to 1,195,445 units as customers flocked to showrooms before an expected increase in prices of motorcycles and scooters from April. With the resumption of public transport, sales of entry-level motorcycles have softened over the past three months in the rural and semi-urban markets.

On a year-on-year (y-o-y) basis, sales declined by a massive 35.26% since some of the BS-IV compliant vehicles sold in March could not be registered because of the lockdown and were registered later with the permission of the Supreme Court.

According to Mitul Shah, head of research, Reliance Securities, “Automobile vehicle registration data indicates double-digit decline on a y-o-y basis, though it improved m-o-m and the next two months are critical in terms of how the covid situation takes shape and its impact on the economy."

“There are clear visible signs of a slowdown in the two-wheeler segment at present, while passenger vehicle segment volumes are impacted by the supply constraints of key components. Commercial vehicles also exhibit improvement every month by reporting lower decline. Rising covid cases and the fear of a second wave started taking a toll on the automobile industry since the second half of March," Shah added.

According to a Fada survey, 48.7% auto dealers think sentiment in the market is good and sales in April will continue to grow despite the rising covid-19 cases. Another 31.7% dealers think that sales will remain flat, while the rest 19.6% think that retails will decline due to rising covid infections.

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