InvestorQ : How have been the retail sales of vehicles in the month of June 2022?
Dia Deshpande made post

How have been the retail sales of vehicles in the month of June 2022?

swati Bakhda answered.
1 month ago

While the regular wholesales of vehicles gives an idea about the despatches by the manufacturers to the wholesalers, it is the vehicle registrations under the Vaahan website that actually gives an idea about the retail appetite. This data is released on a monthly basis by the Federation of Automated Dealers Association (FADA). The FADA data for June 2022 is fairly encouraging and largely in sync with the SIAM data.

Here is a quick peek at the monthly number of sales / registrations as put out by FADA for June 2022. Let us look at the macro number first. Registrations for all categories of vehicles showed 27.2% growth in numbers at 15,50,855 units for the month of June 2022. OF course, one can say that June 2021 may not be a comparable base due to COVID, but the numbers are still fairly encouraging, in the middle of several headwinds for the auto sector.

It is not just the monthly data put out by FADA, but even the cumulative quarterly data for the June 2022 quarter is also quite encouraging. For the quarter, the auto industry recorded 64% uptick in Vaahan registrations to 48,32,955 units for the April 2022 to June 2022 quarter. However, the number is yet to reach the pre-COVID levels as the number is still 8% short of the vehicle sales in the pre-Covid period of 52,60,403 units.

Interestingly, the robust growth in registrations in June 2022 and in the June quarter came from passenger vehicles (PVs) and not from two-wheelers. In fact, Passenger vehicles (PVs) registered 40% growth in June 2022 with cumulative sales of 260,683 units for the June 2022 quarter. It looks like the PV segment has finally gotten a hang of how to handle the microchip shortage. However, with rural demand being tepid, 2-wheelers lagged.

Let me spend a moment on the 2-wheeler segment. It did show positive growth in June 2022 in terms of registrations but growth was relatively subdued at 20.23% growth selling just 11,19,096 units FADA has warned that despite this growth, the 2-wheeler sales have continued to be on the slow lane. This can be attributed to weak rural demand and a back-ended impact on agricultural income levels, in contrast to the pick-up in 4-wheeler PVs.

Some of the key reasons for this slowdown in the 2-wheelers space are high acquisition cost, high fuel prices, as well as inflationary pressures leaving a mark on the household budgets of people. This market is highly sensitive to price and affordability. However, the good news is with monsoons hitting major parts of India, a good Kharif output should help the two wheeler numbers to pick up from July onwards.

Broadly, there could be 3 factors to keep a tab on in the coming months. Firstly there is the overhang of inflation pressures, which is likely to remain a major red flag for the growth of entry level models across categories. Secondly, the Russia-Ukraine conflict kept oil prices under strain and that will affect the affordability of vehicles for a price sensitive segment. Finally, there is the fervent hope that the Kharif turns out to be better than expected.