‘Worst festive season in decade’: 5 factors for woes of Indian auto sector

The period spanning from Ganesh Chaturthi, Navratri and other festivals across the country to Dhanteras and Diwali usually means brisk business for India's auto industry. Sales touch high points for the calendar year and new launches tend to corner maximum traction. This year, however, has been far from memorable as a range of factors have dealt a body blow to the industry, especially the passenger vehicle segment.

The Federation of Automobiles Dealers Association (FADA) recently highlighted just how severe the festive period has been. Calling it the worst festive season in terms of sales performance in a decade, FADA President Vinkesh Gulati blamed a series of reasons for why current times have been far from good.

Here are five factors that are having an overbearing impact on the Indian automotive sector at present, in terms of sales:

• Global semiconductor shortage is having a massive impact on production cycles for almost every major auto manufacturer in India and across the world. Production cycles have had to be temporarily put off which has led to supply-related issues and delivery timelines being pushed back. In many cases, bookings have reportedly been cancelled owing to delivery delays which, obviously, impacts sales figures. And with no resolution in sight to the global problem, the road ahead remains gloomy.
• Rising cost of certain materials has led to many companies experiencing a crunch and in the worst case scenario, the burden has also been passed on to customers in terms of price hikes. A price hike before or during festive period is the opposite of what a prospective customer expects and this may also have a negative impact on sales.
• Covid-19 cases in India may be coming down but Gulati highlights that demand for small vehicles is still lower than expected as people may be continuing to conserve money for healthcare reasons. He further highlights that economic uncertainties may mean that high-value purchases are being put off for now. OEMs however continue to underline that demand remains robust but it is supply that is a concern due to chip shortage.
• Rising fuel prices may be having an impact on demand for new vehicles. With petrol now over ₹110 per litre and diesel slamming a century too, the cost of driving or riding a vehicle has increased tremendously in recent months. It is important to note here though that demand for personal mobility in Covid times may still be the reason for unprecedented surge in demand of pre-owned vehicles. Conserving money while still having a personal vehicle is a balancing act with pre-owned sector possibly providing the fulcrum.
• Fewer launches in mass-market segment, when compared to previous years, could also be affecting buyer sentiments. The country's largest car maker, for instance, brought in only a facelift model early 2021 and is now readying another updates model for launch. Other key players in the ‘affordable’ price segment have also been comparatively quieter.