Semiconductor shortages weigh on passenger vehicles as retail sales down 10%, says FADA; Budget 2022 to lead sales growth in commercial vehicles

The passenger vehicle retail sales have declined 10 per cent on the year-on-year basis in January 2022, Federation of Automobile Dealers Association, India (FADA) informed on Monday.

The companies continued to suffer production loss amid semiconductor shortage, as per a PTI report. 

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"In spite of good demand, passenger vehicles continue to face the brunt of semiconductor shortage, resulting in the absence of a healthy inventory," FADA President Vinkesh Gulati said in a statement.

The automobile dealers' body has also focused on the brighter side soon as the semiconductor shortage is showing some signs of improvement and moreover with Union Budget 2022 emphasising on developing 25,000 km of new highways will lead to the growth in commercial vehicle sales.

PV sales dropped

The passenger vehicle (PV) sales dropped to 2,58,329 units last month, down 10.12 per cent from 2,87,424 units in January 2021.
Two-wheeler sales last month declined by 13.44 per cent to 10,17,785 units, compared to 11,75,832 units in January 2021.
Tractor sales stood at 55,421 units last month, down 9.86 per cent from 61,485 units in January 2021.Gulati said that rural distress coupled with price rise and omicron wave led to a drop in the sales in the segment.

Growth for commercial vehicles and three-wheelers

Commercial vehicle sales, however, witnessed a growth of 20.52 per cent last month at 67,763 units, as against 56,227 units in the year-ago month. 

"With the revival in the economy, the commercial vehicle segment continues to show year-on-year growth, especially in the HCV category. With increased infrastructure spending by the central as well as state governments, the overall CV segment remains in momentum," Gulati noted.
Furthermore, the three-wheeler retail sales have also grown by 29.8 per cent to 40,449 units in January 2022 as compared to 31,162 units a year ago.

Status on semiconductor shortage

The total sales across categories last month declined by 10.69 per cent to 14,39,747 units from 16,12,130 units in January 2021.

On a brighter note, Gulati informed, "Semiconductor shortage is also showing some signs of easing as many PV OEMs assure of better dispatch. We hence expect vehicle availability to improve going further."

Budget 2022: How can it increase sales of commercial vehicles?

Gulati stated that with the Union Budget stressing on developing 25,000 kms of new highways, it will further push infrastructure spending, thus, increasing commercial vehicle sales.
"Rural India has generally been a key driver for the two-wheeler and entry-level passenger vehicle segment. With the government's plan for 2.3 lakh crore direct payment as MSP to farmers, it may work as a booster for two-wheelers, tractor and entry-level PV sales," he added.

(With inputs from PTI)