Automobile Sales End December On A Weak Note

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Jan. 3, 2022

Automobile sales (retail) were generally disappointing in December, declining sharply on a YoY basis. On a YoY basis, sales have generally been declining in the last few months in the case of Passenger Vehicles and 2W sales have been below the 2019 level as well. Some of this decline, especially in the case of Passenger Vehicles, can be attributed to supply chain constraints. However, the decline in 2W sales suggests that the economic recovery is still not broad-based. The strength in Tractor sales, while positive, suggests that there is still some amount of dislocation in the labour market causing farmers to substitute labour with equipment. The CV cycle appears to be on the cusp of recovery and the improvement in sales trajectory confirms the ongoing recovery in the Industrial sector.

Two-Wheeler (retail) sales declined 20% YoY in December, the sharpest decline since March. 2W sales have declined for four consecutive months. More importantly, December sales were 10% below the December 2019 level. 2W sales have been below the 2019 level every single month this year with sales being 20% below the 2019 level during the December quarter. Note that this sales data is inclusive of electric 2Ws.

Passenger Vehicles (Cars, SUVs) have done relatively better. While sales (retail) declined 11% YoY in December for the third consecutive month, the pace of decline was lower than in the preceding two months. More importantly, December sales were 12% higher than the December 2019 level, after being below the 2019 level in the preceding two months. For the quarter, which includes the important festival season, sales were 7% lower than the 2019 level – much lower than the decline for 2Ws.

While at a headline level, tractor (retail) sales appear weak, the underlying trend is encouraging. While sales declined in December for the fourth consecutive month, the decline largely reflects the base effect. Compared to 2019, sales rose over 20% in December and during the quarter they were almost 15% higher. Tractor sales have been higher than 2019 in every single month of 2021 barring May (the second wave of the pandemic) and November (festival season mismatch). While other categories of Automobiles saw a sharp decline in 2020 and 2021 has been the year of recovery, tractor sales have seen growth in both 2020 as well as 2021.




While the above categories saw sales decline in December, M&HCV sales rose almost 30% YoY in December. M&HCV sales have grown on a YoY basis in every single month this year since April. That said, the growth rate has moderated as the base has become less favourable. Notably, December was the first month this year when sales were above the 2019 level. So, the CV cycle appears on the cusp of a recovery.

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