Vehicle registration trend weak in August too, says FADA

Auto vehicle registration in the month of August continued its downward march as retail slipped 26.81 pct according to data provided by Federation Of Automobile Dealers Associations (FADA). On a brighter side, registrations were up 3.8 pct in comparison to July 2020. Vehicle Registrations for August showed improvement due to ongoing festivities.

Two-Wheeler registrations were down by 28.71%, 3-Wheeler by -69.51%, CV by -57.39% and PV by -7.12%. On the other hand, Tractor registrations continued its positive momentum and registered 27.80% growth.

Entry Level Passenger Vehicles shows initial signs of demand revival as customers conclude their purchase with Janmashtami and Ganesh Chaturthi during the month. However, overall demand is still not back to pre-Covid levels as despite abundant liquidity, risk averse mood of Banks and NBFC’s coupled with stricter CIBIL scores, failed to capture demand in the current month.

FADA awaits reduction on GST for 2 wheelers and roll out of incentive based Scrappage Policy thus re-igniting demand.

Vinkesh Gulati, President, FADA said, "Passenger Vehicles after 5 months saw decline reducing to single digits. Apart from Rural Market which was showing revival signs until now, Urban Centres for the first time showed initial signs of demand pullback. Tractor, Small Commercial Vehicles and entry level Passenger Vehicles positively impacted August Sale.

He further said that Overall demand is still not back to pre-Covid levels as Banks and NBFCs continue to have a cautious approach towards funding. Commercial Vehicles, especially M&HCV category is still suffering from higher lead times with financers and an increase in cost of acquisition leading to viability issue. A stricter CIBIL score is also affecting customer finance.

As far as near term outlook is concerned, FADA stated that September brings with itself the 16-day Shraadh period coupled with 30-day Adhik Maas period when no high value transactions take place. If NPA’s are not too high and recovery rate is even neutral to positive, Banks and NBFC’s may return with aggressive financing schemes for Auto Loans thus leading to a strong demand pullback.

On the supply front, OEM’s are dispatching vehicles to Dealers with a purpose of stocking-up inventory for the upcoming festival season, but retail sales are still at 70-75% levels despite the low base of last year.
 

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FADA advises extreme caution to all OEMs and our Dealer fraternity to avoid excessive Inventory build-up thus leading to unmanageable interest cost which could further result in dealership closures.

by Daanish Anand