What January auto sales data means about consumer demand and economy

India’s car and bike sales remained depressed at the retail level in January while bus and truck sales recovered, but demand across most categories stayed well below pre-Covid levels.

Total vehicle sales fell 10.7% to 14.39 lakh units for January 2022 from 16.12 lakh units a year earlier, as per data released by the industry body Federation of Automobile Dealers Associations (FADA).

According to FADA, the apex national body of automobile retail industry in India, total sales were 18.4% lower than the 17.65 lakh units sold in January 2020, before the onset of the pandemic.

Sales of two-wheelers came in at 10.17 lakh units in January 2022, down 13.44% from a year earlier and a drop of 20.3% from January 2020.

Passenger vehicle sales, which include cars and sport-utility vehicles, declined 10.12% from a year earlier to 2.58 lakh units and were 12.42% down from January 2020. Sales of commercial vehicles climbed by a fifth to 67,763 units but remained 9.2% lower than January 2020 level.

The medium and heavy commercial vehicles segment recorded strong year-on-year increase in sales on expectations the launch of various infrastructure projects may push demand for buses and trucks higher. Sales of light commercial vehicles rose, too, but remained a sixth lower than January 2020 levels.

Demand for passenger vehicles such as cars and two-wheelers such as scooters and bikes has long been used as a bellwether for consumer sentiment. Similarly, demand for commercial vehicles, including trucks and buses, is an indicator of business sentiment and has significant implications for the domestic growth story.

The fact that sales of cars, bikes, trucks and buses remain below pre-pandemic levels indicates not only that the automobile industry hasn’t fully recovered but also that the broader economy is yet to reach pre-pandemic levels. The situation is worse in rural areas since bike and scooter sales, in particular, is a key indicator of rural demand and rural consumer sentiment.

“The month of January continues to show weak performance,” said FADA President Vinkesh Gulati. He said that a comparison with auto retail sales for January 2020 shows India is yet to recover from the Covid-19 pandemic which gripped the world two years ago.

FADA said that in spite of good demand, the passenger vehicle segment continues to face the brunt of the semi-conductor shortage. Rural distress, price rise and the Omicron wave of Covid-19 hurt the two-wheeler category.

In fact, 55% dealers in FADA’s internal survey said that they lost more than 10% sales due to the Omicron wave, the industry body said.

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Other highlights for January 2022

1) Sales of heavy commercial vehicles such as trucks and buses surge 41% year on year to 20,279 units.

2) Sales of medium commercial vehicles jump 17.11% year on year to 4,093 units.

3) Tractor sales fall 9.86% from a year ago to 55,421 units but are 1.36% higher than two years ago.

4) Three-wheeler sales rise 30% to 40,449 units but are down almost 37% from two years ago.

5) Passenger vehicle inventory was 8-10 days at the end of January while two-wheeler inventory was 25-30 days.

Outlook

With the revival in economy, the commercial vehicle segment continues to show year-on-year growth, especially in the heavy vehicle category. With increased infrastructure spending by central as well as state governments, overall commercial vehicle segment remains in momentum, FADA said.

As India gets back on its feet after the third wave of Covid-19, FADA expects that auto retail sales will slowly turn positive. Semi-conductor shortage is also showing some signs of easing as many passenger vehicle makers have assured of better dispatch. “We hence expect vehicle availability to improve going further,” FADA said.

The lobby group also said that the Union Budget for 2022-23 stressed on developing 25,000 kms of new highways. This will push infrastructure spending, thus resulting in an increase in commercial vehicle sales. Also, some traction is being witnessed in replacement demand after a period of two years, FADA said.

The government’s plan to make direct payment to farmers and the upcoming marriage season may also trigger some demand revival for the two-wheeler segment in rural areas, FADA said.

Overall, FADA changed its outlook from ‘negative – neutral’ to ‘neutral’ for the next couple of months.

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