Festive season may be a damp squib for passenger vehicle segment. Here's why

The festive period of the calendar year is around the corner and while hopes are high in the automotive industry for sales to once again jump manifold, the reality this time around could be rather different. With a global shortage in semi-conductor chip becoming a very real issue for manufacturers, experts believe that supply may be unable to keep pace with demand.

There is a healthy demand for vehicles across segments in the Indian market. As per vehicle registration data for August released by Federation of Automobile Dealers Associations (FADA) on Tuesday, all segments are in the green. But FADA has also predicted a lackluster festive season, especially for passenger vehicle segment. “With OEMs drastically cutting down productions due to unavailability of semi-conductors and ABS chips, shortage of containers and high metal prices, customers for the first time may not get a vehicle of their choice and lucrative schemes during this festive season," the FADA statement reads.

FADA also notes that frequent price hikes from manufacturers are making prospective customers push back or call off their buying plans. "Customers especially at the bottom of the pyramid are shifting their priority from saving instead of spending," it notes.

Companies like Maruti Suzuki and Mahindra have announced production cuts for the month of September. Waiting time for some of the most popular vehicles span across several months. And with a third wave of the pandemic remaining an omnipresent threat, market watchers aren't betting big on the festive season to bolster prospects even if big strides have been taken since the end of restrictions post second Covid-19 wave.

While the month of July and August saw a slew of new or updated launches, these are likely to slow down in September. This is in contrast to previous years when the period just before festivities have seen big-ticket launches in order to make the most of positive buying sentiments. If supply-demand mis-match persists, it could well be a problem spilling into the next year as well.

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