According to a report by India Ratings, the 5 per cent sequential increase in domestic auto sales volumes (excluding commercial vehicles (CV)) in October 2021 was driven by a demand recovery in passenger vehicles (PVs) and stable two-wheeler (2W) demand, aided by the festive season, and decline in daily Covid cases, the resumption of physical attendance at educational institutions and workplaces, and continued consumer preference for personal mobility.
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However, the growth was constrained by an increase in vehicle prices, due to increased raw material prices, and lower production levels on account of supply chain issues, especially the shortage of semiconductor chips. The overall production and sales volumes decreased by 22 per cent year-on-year and 21 per cent year-on-year, respectively, in October 2021.
Chip shortage impact on PV production
Despite the festive season, retail sales for PVs and 2Ws fell by 11 per cent YoY and 6 per cent YoY owing to semiconductor shortage in PVs and low demand for entry-level 2W, respectively; 3W and CV volumes increased by 74 per cent and 26 per cent, respectively. The industry continued to witness sequential growth in October 2021, though it was moderated by lower production levels due to supply chain challenges and low consumer demand.
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India Ratings expects the semiconductor crisis to continue to impact PV production volumes in November 2021. 2W volumes might remain moderate owing to low consumer demand in the entry-level segment.