Vehicle registrations fall 36% in July, retail sales remain a worry — festive season fuels the recovery hopes

• Vehicle registration data from the Federation of Automobile Dealers Associations (FADA) showed a 36% decline in July year-on-year basis.
• Every segment saw a negative growth except the tractor that recorded over 37% growth on the back of a good monsoon season and healthy crop procurement.
• The stocks of the Indian automobile companies have shown a similar optimism. And, analysts believe that there may be more demand coming in.

Registration of vehicles across India fell 36% in July year-on-year as the COVID-19 led slowdown continues to hurt the sector, said the Federation of Automobile Dealers Associations (FADA). Except for tractors, all other segments remained in the red.

The only ray of optimism is the improvement in numbers. Although the growth is still negative, the numbers are better than what the sector recorded in May and June.

According to Karvy stock-broking firm, these numbers are enough to fuel up hopes because there has been an improvement in volumes “amid uncertainty over rising COVID cases, subdued capacity utilization, shortage of labour and increasing risk of virus spread in rural areas.” Pent-up demand and consumers’ shift away from public transport is likely to bring some relief in the months ahead.

Every segment saw a negative growth except the tractor that recorded over 37% growth on the back of a good monsoon season and healthy crop procurement. Three-wheeler and commercial vehicles were the worst hit due to the adverse effect of lockdowns on freight volumes, changes in load-carrying norms and lack of proper financing channels due to NBFC liquidity crisis.

All-India vehicle registration data for July:
Source: FADA

Future outlook

Assuming that there will be no further prolonged lockdowns, FADA projected that in the coming months, the vehicle registrations number would see speedy recovery, with green shoots of demand in newer geographies and segments.

“August brings with itself the beginning of the long festival season. With Onam and Ganesh Chaturthi in the next few days, FADA hopes that Auto Industry will start its recovery journey in a linear manner,” according to the FADA release.

The stocks of the Indian automobile manufacturer has shown a similar optimism. And, analysts at Elara Securities believe that there may be more demand coming in.

Source: Elara Securities

However, the full-year outlook continues to remain negative with a projected de-growth in retail sales in the range of 15%-35% across various segments except for tractors, which looks set to clock a positive annual growth, FADA said.

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