Worst festive season of the decade, these 5 reasons are responsible for the crisis in the Indian auto sector

Auto Sector: The period from Ganesh Chaturthi, Navratri and other festivals across the country to Dhanteras and Diwali usually means brisk business for India’s auto industry. However, this year was not a memorable one as several factors have given a major setback to the industry, especially the passenger vehicle segment.

Federation of Automobile Dealers Association (FADA) recently highlighted how serious the festive period has been. Describing it as the worst festive season in terms of sales performance in a decade, FADA President Vinkesh Gulati attributed several reasons as to why the current times are not good. Here are 5 reasons that are currently making a huge impact on the Indian automotive sector in terms of sales:-

Global Semiconductor Shortage
Global semiconductor shortage is having a massive impact on the production cycle of almost every major auto maker in India and across the world. Production cycles have had to be temporarily halted due to supply issues and pushing back delivery timelines. In many cases, the booking has been canceled due to delay in delivery, which obviously affects the sales figures. With no solution to the global problem, the road ahead remains bleak.

rising cost
Many companies are facing crisis due to rising cost of certain materials and in the worst case, the customers have also been burdened in terms of price hike. An increase in prices before or during the festive season is against the expectation of a potential customer and can also have a negative impact on sales.

Reduced demand for small vehicles
Covid-19 cases in India may be down, but Gulati said the demand for smaller vehicles is still lower than expected as people can continue to conserve money for health-related reasons. He further said that economic uncertainties could mean that high value buying is being stopped for now. While OEMs say that demand remains strong, it is supply that is a concern due to chip shortage.

fuel prices
Rising fuel prices may have an impact on the demand for new vehicles. With petrol prices now over Rs 110 per liter and diesel also reaching the century, the cost of driving or riding a vehicle has increased tremendously in recent months. It is to be noted that the demand for personal mobility in the times of covid may still be the reason for the phenomenal increase in the demand for pre-owned vehicles. Conserving wealth despite having a private vehicle is a balancing act with the pre-owned sector possibly providing the base.

low launch
Fewer launches in the mass-market segment as compared to previous years, may also affect buyer sentiments. The country’s largest carmaker, for instance, brought only one facelift model in early 2021 and is now preparing another updated model for launch. Other major players in the ‘affordable’ price segment have also been comparatively quiet.

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