Private Vehicle Sales Drop Sharply In 2021-22. Here's Why

Private vehicle sales slumped during the fourth quarter of financial year 2021-22 (FY22), government data showed. According to the gross domestic product (GDP) estimates for Q4 FY22, released on Tuesday, sales of private vehicles dropped by 19.2 per cent compared to a 27.1 per cent rise in same the period of FY21.

The sharp plunge in sales comes on the heels of a global semiconductor shortage -- leading to the long-waiting period for cars. High fuel prices, rising inputs cost for the manufacturers and geopolitical tensions also impacted the demand.

Waiting periods for various models have gone up even beyond 2 years. For example, you have to wait 90 weeks for the top model of Mahindra XUV - 700, while 44 weeks for that of Thar.

According to car dealers, the demand for vehicles shot up after the pandemic, but the supply couldn't keep up. The global semiconductor shortage keeps vehicle supply restricted, as chips are key components across car models. As per Mahindra's dealers, An XUV 700 has around 84 chips, making semiconductors critical for car manufacturing.

"On one side, there's a demand for some models, categories which are the premium kind of products. But on the other hand, when we talk of the entry-level segment, customers are not there for buying. We have a long waiting list for the premium vehicles and the compact SUV segment due to the semi-conductor issues, container issues and China's Covid curbs. Production is still not normal. We've seen some good months -- in April and March -- but from April onwards, the same issue is there," Vinkesh Gulati, President, Federation of Automobile Dealers Associations (FADA), told NDTV.

He further said, "The entry-level segment is badly hit" as "such customers are still reeling under the pressure of post-Covid things. Fuel prices and material costs have increased. For the past two years, the entry-level vehicle acquisition price has gone up around 20-25 per cent, which is a major jump for a person who wants to buy a car for Rs 4 lakh."

The Russia-Ukraine conflict and external global issues have also dented the sales, Mr Gulati added.

He hoped that by the month of October -- which is the start of festive season -- there will be "enough production and the supply chain will regularise."

On reduction in waiting period -- which has climbed to around 2 years for some cars, Mr Gulati said "it will improve" but "predicting that whether it will come down drastically, I've still my doubts because those are the vehicles where every customer has an interest."

He also said that "the rate by which we add vehicles every month has come down a bit."