Cars, tractors can rebound, two-wheelers and trucks are exposed to headwinds: FADA

Vehicle showrooms have remained closed in most key markets for the past three weeks and a large number of states have been hit by the Covid resurgence.

With 209,000 units, car sales fell by 25.33 percent last month monthly (March 2021: 280,000 units) according to the Association of Car Dealers’ Associations (FADA) on Monday. Since April 2020 was a washout due to the national lockdown, a comparison with the previous year is pointless.

“The mood is a little worse compared to the previous year, as every second family is affected by Covid. If people move, car sales will experience an upswing, ”says FADA President Vinkesh Gulati.

The good news for automakers is that there have been no cancellations and there is already a two to six month wait for popular models due to the discrepancy between supply and demand. Additionally, through digital interactions with prospects, retailers have created a pool of data that can be used as soon as things are resumed. New launches will also help bring the mood back to life.

It is currently clear that the recovery process can take some time, as the operational infrastructure must be functional again. “Retail is not the job of a single man. we have to open everything. It won’t happen if financial firms, RTOs, or service centers aren’t fully functional. Nevertheless, I doubt that there will be problems in the car segment with customers who do not buy vehicles, ”says Gulati.

The lukewarm 2W sale continues despite the wedding season
However, the same does not apply to two-wheelers. FADA is “still cautious” in this segment and not overly optimistic that the segment will recover quickly enough. The registration figures for April show a decrease in two-wheelers by 28 percent compared to the previous month from 1.19 million units in March 2021 to 865,000 units.

While sales have undoubtedly suffered from school and college closings for over a year, the plight in rural India with the spread of Covid has made things worse. “Almost 20 percent of the rural population is infected and this has had an impact on sales of entry-level cars and commuter motorcycles,” added Gulati.

April and May are traditionally good months for the two-wheeler trade, mainly due to the wedding seasons in Uttar Pradesh, Bihar and Rajasthan, but with the dealers closed this was a huge setback.

The demand for tractors should recover
In the tractor segment, which developed very well last year and was the exception to the rule, sales fell by 45 percent in April to 38,285 units (March 2021: 69,082 units). “In the last fiscal year, an average of 50,000 to 60,000 units were sold per month. As soon as the effects of Covid on rural areas wear off in about a month, I expect a good turnaround, if not as much as last year, ”notes Gulati.

CVs by the end of 2021
However, the FADA boss isn’t as hopeful about commercial vehicles, where the MoM has dropped from 24 percent to 67,472 units in March 2021 to 51,436 units. “Covid has disrupted the CV segment again. This problem will continue with the decline in industrial activity, infrastructure and freight movement. CV sales are not expected to improve in the next six months, ”he warns.

The good news for the CV sector is that the growing demand for oxygen across the country has fueled demand for medium and heavy duty vehicles, which in turn has put pressure on bus manufacturers and cryogenic tank suppliers. There are also some activities in small résumés that also carry oxygen bottles.

The other positive for the auto industry is the forecast of a good monsoon. “Like last year, the rural upswing is expected to get faster and better. A good monsoon improves the mood with farmers’ expectations for a good harvest and good income. While the real effects of the rains will be felt from July to September, things could get better from June, ”says Galati.