Semiconductor shortage to dampen PV sales this festive season: FADA

Federation of Automobile Dealers Associations of India (FADA) on Tuesday expressed concerns over chip shortage issue that could bog down Passenger Vehicle (PV) sales during the festive season as automakers continue to struggle with an adequate supply of vehicles due to production challenges. The automobile dealers body warned of a lackluster festive season due to chip shortage especially for the PV segment due to lower inventory levels and non-availability of the fast-moving model variants ahead of the peak festive period.

Every dealer will start planning a bigger offtake in anticipation of a bumper festive season by now, but due to supply issues, inventory levels are at the lowest levels during this financial year, the industry body added.

Due to the demand -supply gap, customers may not get a vehicle of their choice and attractive schemes during this festive season as OEMs are drastically cutting down production due to unavailability of semiconductors and ABS chips, shortage of containers and high metal prices, FADA said.

It added that customers especially from the bottom of the pyramid have been saving to buy a four-wheeler. This will hit the demand for two-wheelers also.

However, with educational institutions slowly opening up, a ray of hope can be seen for an improved demand in coming months, it said.

FADA also noted that the near term outlook will continue to remain a mixed bag with PVs witnessing demand-supply mismatch and two-wheeler segment facing a demand crunch.

Average inventory at the end of July for passenger vehicles stood between 25-30 days, while in the two-wheeler space it ranged between 20-25 days, it said.

With bluetooth connectivity and driver-assist, navigation and hybrid-electric systems besides the engine control unit, the usage of semiconductors in the auto industry has gone up globally in recent times.

However, the auto industry accounts for about 10% of the overall semiconductor demand, with the rest coming from the electronic appliances and gadget industry, such as mobile phones and laptops, among others.

PV sales increases by 39% y-o-y

FADA said that retail sales of passenger vehicles (PV) in August increased by 39% YoY to 2,53,363 units. According to the industry body PV sales stood at 1,82,651 units in August 2020.Two-wheeler sales had risen by 7% to 9,76,051 units last month as compared to 9,15,126 units in the year-ago period.

Commercial vehicle sales increased by 98% to 53,150 units last month against 26,851 units in August last year. Three-wheeler sales surged by 80% to 30,410 units last month from 16,923 units in the year-ago period.

The total sales across categories increased by 14% to 13,84,711 units in August as against 12,09,550 units in August 2020.