After five months of steep decline in the backdrop of the COVID-19 pandemic, passenger vehicle registrations for August showed a softer decline. According to vehicle registration data from the Federation of Automobile Dealers Association of India (FADA), passenger vehicle retail declined 7.12 percent in August year-on-year, a sharp improvement over the 25 percent contraction in retail sales in July.
However, the improvement needs to be viewed along with the base effect from August 2019, the worst month for the PV industry last year. The arrest in decline, therefore, comes on the back of an already low base from last year, albeit there is incremental improvement on a monthly basis. FADA said that despite the low base from last year, retail sales are only at 70-75 percent levels.
Festivals of Onam in South India, Ganesh Chaturthi in the West and Jannmashtami in the North, led to some positive momentum, helped by improvement in vehicle supply and a better product mix, compared to July. In metros, Delhi saw a marginal increase in PV registrations in August as economic activity and movement of people improved.
However, sales riding on pent-up demand in urban centres are now receding. According to FADA, urban markets are showing initial signs of demand pullback, even as localised lockdowns and shut markets are affecting walk-ins to showrooms in tier-2 and tier-3 towns.
While the number of first-time buyers in the entry segment is expanding, regional demand remains negligible, sources told CNBC-TV18.
The long wait before festive season
However, after a marginally better August, September brings with it challenging times. The first couple of weeks of the month fall under the inauspicious period, or the shraadh/pitrupaksh period, wherein customers refrain from making high-ticket value purchases.
After a period of 19 years, this is immediately followed by 30 days of Adhik Maas, another inauspicious month which may impact demand in the north, west, and eastern regions.
Auto dealers, therefore, are experiencing lost leads to the extent of 30% due to the long gap between the inauspicious period and the onset of the festive season in October. They are also observing customers are taking longer time to plan their finances for a festive purchase.
Moreover, a resurgence in the number of Covid-19 cases and poor economic activity is further making dealers vary. The anticipation, therefore, is that festive buying will start in a significant sense only from October, and will be split with the month of November, as Diwali falls in early November this year.
OEMs, however, have been building up inventory anticipating festive demand from August onwards, and the trend may well be reflected in September wholesale figures as well.
First Published: IST