Vehicle registration shows improvement in August, still down by 26.81 YoY: FADA

FADA that entry Level Passenger Vehicles have shown initial signs of demand revival as customers sitting on fence finally concluded their purchase

New Delhi: Vehicle registration have shown improvement on month on month basis, but it is still down as compared to year on year basis, the Federation of Automobile Dealers Associations (FADA) releasing the monthly vehicle registration data for the month of August 2020 said on Wednesday.

Vehicle registrations for August shows improvement due to ongoing festivities when compared MoM but still down by -26.81% on YoY basis, FADA said.

On yearly comparison, 2-Wheeler segment witnessed degrowth by -28.71%, 3-Wheeler by -69.51%, CV by -57.39%, and PV by -7.12%. Tractor registration continued its upwards journey with 27.80% growth, FADA said.

The Auto Association added that entry Level Passenger Vehicles have shown initial signs of demand revival as customers sitting on fence finally concluded their purchase with Janmashtami and Ganesh Chaturthi during the month.

Overall demand still not back to pre-covid levels as despite abundant liquidity, risk averse mood of Banks and NBFC’s coupled with stricter CIBIL scores, fails to capture demand in the current month, FADA added.

FADA said that it is awaiting the government’s reduction on GST for 2 wheelers and roll out of incentive based Scrappage Policy thus re-igniting demand and once again making Auto a lead indicator of growth.

"Apart from Rural Market which was showing revival signs until now, Urban Centres for the first time showed initial signs of demand pullback. With the Government’s priority in spending towards rural development and agriculture, coupled with good monsoon and a healthy sowing season, Tractor, Small Commercial Vehicles and entry level Passenger Vehicles positively impacted August Sales,"  FADA President, Vinkesh Gulati said.

He added, "Overall demand is still not back to Pre-covid levels as Banks and NBFCs continue to have a cautious approach towards funding. Commercial Vehicles, especially M&HCV category is still suffering from higher lead times with financers and an increase in cost of acquisition leading to viability issues. A stricter CIBIL score is also affecting customer finance."

In its near term outlook, the Auto association said that the moratorium period from banks has ended on Aug 31, during which if NPA’s are not too high and recovery rate is even neutral to positive, Banks and NBFC’s may return with aggressive financing schemes for Auto Loans thus leading to a strong demand pullback.

While OEM’s are dispatching vehicles to Dealers with a purpose of stocking-up inventory for the upcoming festival season, retail sales are still at 70-75% levels despite the low base of last year. FADA has advised extreme caution to all OEMs and Dealer fraternity to avoid excessive Inventory build-up thus leading to unmanageable interest cost which could further result in dealership closures.