The COVID-19 pandemic affected a lot of industries, but the automotive industry which was already declining became one of the worst affected. This decline commenced in 2019, due to the imminent switch to BS6 emission norms. Which later snowballed the effect of the pandemic going into 2020.
Although things were starting to look good, after enduring the first wave of the pandemic. The industry got another beat down from the second wave of COVID-19, thus halting the resurgence. The Federation of Automobile Dealers Associations (FADA), reported that new vehicle sales in India declined by 2.7 per cent last month as compared to November 2020. However, this decline may not seem a huge deal on the face of it, but we have to remember that 2020 was already on the decline.
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A decline of 31.78 per cent at 12,88,749 units as compared to 18,89,348 units sold in the same month last year is one of the worst in recent times. This dwindling effect on the industry was further aggravated by the semiconductor shortage. Despite having a huge number of customers interested in buying a new vehicle, this crisis has crippled the manufacturers from producing more cars. In turn, this has strayed away a lot of potential buyers, as nobody wants to wait months and months out.
Companies are trying their very best to lure in more customers with new product launches, but this shortage of semiconductors is slowing down the production lines. Resulting in a ton of people to drop their plans to buy new automobiles. The passenger vehicle (PV) sales reported last month stood at 2,15,626 units, down 19 per cent from 2,64,898 units in November 2020.
What is worse is that the two-wheeler sales declined even steeply, almost by 34 per cent. The total sales recorded was 10,50,616 units last month from the 16,00,379 units in the year before. Additionally, the total three-wheeler sales stood at 22,471 units, down 7 per cent from 24,071 units in November 2020.
Society of Indian Automobile Manufacturers (SIAM) director-general Rajesh Menon said, “The industry continues to face headwinds due to global semiconductor shortage. In the festive season, industry was hoping to make up for the lost ground, but the sales in the month of November were the lowest in seven years for passenger vehicles, the lowest in 11 years for two-wheelers and the lowest in 19 years for three-wheelers,”
Another reason for this dip in sales of automobiles is attributed to the crop loss due to incessant rains and floods in southern parts of the country.
The FADA has also stated that their worries have been further intensified because of the newest variant of the COVID-19 virus, Omicron. The organization said that the increasing vehicle prices raised due to higher input costs can further deteriorate the sales of new vehicles in the nation. However, they are also optimistic in the sense that the semiconductor shortage could fade away by mid-2022. Mentioning the resurgence FADA has commented that unless demand from the rural sector increases, automotive sales won’t be able to improve that much.
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