Mumbai, Mar 4 : Automobile industry apex body FADA on Friday said the ongoing Russia-Ukraine war brings new set of challenges for Indian auto retail as raw materials for semiconductor will disrupt supplies and crude breaching USD 110 mark will act as a hindrance on customer sentiment. Federation of Automobile Dealers Association (FADA) has also revised its outlook for the auto industry from ‘neutral’ to ‘negative’ till the time the Russia-Ukraine conflict doesn’t come to an end. The revision in the outlook comes in the backdrop of a significant decline in total vehicle retail during the month of February as compared to the numbers reported a year-ago. According to FADA, the Indian auto industry during February continues to remain in red as total retails were down by 9.21 per cent year-on-year and 20.65 per cent when compared to February 2020, a regular pre-covid month. “With omicron passing away without much impact and supplies showing signs of recovery, it looked as if the Indian auto industry was at the cusp of recovery until Russia invaded Ukraine. This will once again have ripple effects on the global automobile supply chain,” FADA President Vinkesh Gulati said. Russia is one of the largest producers of rare-earth metals, especially palladium, which is an essential metal for semiconductors. Ukraine on the other hand is one of the biggest producers and exporters of neon gas, which is used in the manufacturing of semiconductors. “Due to the ongoing war, we once again fear the shortage in semiconductors which will create additional supply side issues for PVs. With crude breaching the USD 110 mark, the government will not be able to hold prices of petroleum products for long,” he further said. Post state election results, oil marketing companies will increase fuel prices by at least Rs 10-15 per litre. “While this will act as an obstacle for 2-wheeler sales, with educational institutions and offices now fully open and Gudi Padwa round the corner, we may see some increased interest in 2- wheeler as well as the bus segment, which has witnessed a long dry spell of almost 2 years,” Gulati stated. According to FADA, on a YoY basis, 3W and commercial vehicle segments were up by 16.64 per cent and 7.41 per cent, while the 2W, passenger vehicles and tractors categories fell by 10.67 per cent, 7.84 per cent and 18.8 per cent respectively. “The 2-wheeler segment is showing no signs of recovery as Bharat continues to play spoil-sport. With the cost of acquisition continuously going north, the inquiry level remained weak. As corporates and educational institutions continued operating from home, urban demand also took a hit,” Gulati further stated. Even though the PV segment saw some launches and slight respite in supply due to better production, it was not enough to meet customer demand. The vehicle waiting period thus remains similar to what it was in the last few months. “While commercial vehicles are not at similar levels when compared to pre-covid months, slight recovery on yearly basis was visible majorly due to low base effect. This coupled with increase in government’s infrastructure spending saw continued traction in HCV and tipper segments. Fleet operators who were earlier being missed have slowly started purchasing vehicles,” he added. PSK JNA
