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Data: Vehicle Registrations down 17% even during the Festival season

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The data on vehicle registrations from the Vahan dashboard of the MoRTH indicates that the number of registrations in September & October 2020 is down by almost 17% compared to the same period in 2019. Even the registration data for November 2020 doesn’t look promising. Here is a detailed analysis of the vehicle sales data to understand the impact of the economic downturn.

As of 2019, India was the world’s fourth largest manufacturer of cars and seventh largest manufacturer of commercial vehicles. The automobile industry, both sales and component manufacturing, is an important sector as it accounts for 7.1% of India’s GDP and also accounts for a significant share of the manufacturing GDP. The industry also generates employment for over 3.5 crore persons. Furthermore, automobile sales are an important source of taxation for the government. The sector also attracts a large share of FDI. 

A total revenue of more than Rs. 50,536 crores were accrued to the Central & State governments through various taxes & cess in 2019 alone. However,  the sector was already witnessing a downturn in 2019 and the COVID-19 pandemic further exacerbated the situation as the lockdown resulted in a halt in production as well as sales. Here is a detailed look at the sales numbers of 2020 compared to the same months in 2019. 

Different sets of data available with the Industry Associations & the government

Different sets of data are available with the Industry Associations & the Government that provide us with numbers relating to various parameters. Here is a basic understanding of these datasets. 

Domestic Sales data of SIAM: Data on domestic sales is released by the Society of Indian Automobile Manufacturers, abbreviated as SIAM. This data is also provided by the government in the Lok Sabha. It has to be noted that the numbers pertaining to domestic sales, as released by SIAM, refer to the number of vehicles that have been dispatched by the manufacturing companies to dealers. This data does not indicate the level of retail sales i.e., vehicles bought by consumers. 

Vehicle Registrations data on VAHAN: The registrations data is readily available in the Vahan dashboard, maintained by the Ministry of Road Transport & Highways (MoRTH). Vahan dashboard is a centralized database of vehicles in 33 out of 37 states/UTs which are enrolled in Vahan 4.0. The figures from Andhra Pradesh, Telangana, Lakshadweep, and Madhya Pradesh are not included here. The figures pertain to that from 1257 RTOs of the total 1464 RTOs in the country. VAHAN data is a more than reliable estimate of the vehicle registrations and hence a good indicator of retail sales, as registrations take place only after the sale to the consumer. 

Registration Data by type of Vehicles by FADA: The data on vehicle registrations released by the Federation of Automobile Dealers Associations (FADA) in collaboration with MoRTH is also based on Vahan data. This gives numbers related to registration by vehicle type. These figures also pertain to 1257 RTOs of the total 1464 RTOs in the country in 33 of the 37 States/UTs. 

SIAM data reveals that domestic sales have increased since May 2020

According to the data on domestic sales of Society of Indian Automobile Manufacturers, abbreviated as SIAM, presented in the Lok Sabha, prior to lockdown, the domestic sales of passenger vehicles dropped by 44% in March 2020 as compared to February 2020. In April 2020, the sale was recorded as zero. Since then, there has been an increase in the numbers. Month on month comparison reveals that the sales of domestic vehicles has been increasing since May 2020, as per SIAM. 

Meanwhile, the year on year comparison shows that in the months of January, February, and March 2020, there had been a contraction in sales compared to corresponding months in 2019. In March 2020, the sales had dropped by 51.7% compared to March 2019. In May 2020, the sales had dropped by 85% compared to 2019. A positive growth of 14.2% compared to 2019 was recorded in the month of August for the first time in 2020. In September 2020, a growth of 26.45% was recorded while in October, this was 14.19%. 

SIAM data indicates the number of vehicles dispatched to dealers

The relatively positive growth in domestic sales of passenger vehicles and commercial vehicles in the last few months might make one to assume that the automobiles sector is recovering. This assumption is backed with explanations such as the preference of people to commute by private vehicles instead of public transport to avoid risk of infection. But, as explained earlier, the numbers pertaining to domestic sales, as released by SIAM, refer to the number of vehicles that have been dispatched by the manufacturing companies to dealers and do not indicate the level of retail sales to consumers. 

This means that the data under ‘domestic sales’ does not actually refer to sales but to the number of vehicles which have been handed over to dealers to stock inventory which is then sold to customers. Every vehicle that is dispatched to the dealer need not get sold in the same month. Following the Supreme Court’s order to sell vehicles complying to BS-VI norms from April 2020, automobile dealers have been forced to stock up the new BS-VI compliant vehicles which may be the one of the reasons behind the increasing domestic sales as seen above. Moreover, dealers usually stock up vehicles for the festive season that fall in the months of September to November, when the sales usually increase. All these could have resulted in an increase in domestic sales.  

Domestic sales of Commercial Vehicles fell by 85% in Q1 of FY20 

In the case of commercial vehicles, data is provided by SIAM on a quarterly basis for 2020. Even before the pandemic struck India, in the quarter from January to March of 2020, domestic sales of commercial vehicles recorded a drop in sales by over 48.3%. For the quarter from April to June 2020, the sales had fallen by almost 85% whereas for the quarter from July to September 2020, the drop in sales is 20%. Meanwhile, on a quarterly basis, the sales had dropped by 78% in the quarter ending June as compared to quarter ending March 2020 while the sales went up by over three times in quarter ending September 2020 compared to the preceding quarter. The data indicates that even the dealer inventory hasn’t picked up to the levels of 2019 in the case of commercial vehicles unlike in the case of passenger vehicles. 

Vehicle Registrations data is a more reliable estimate of Retail Sales 

Like explained earlier in this story, the vehicle registration data from the Vahan portal is a more reliable estimate of retail sales since the registration takes place only after the sale to a consumer.  This data is readily available in the Vahan dashboard. It has to be noted that the data pertains to 33 of the 37 States/UTs. 

Retail Sales have improved, but not yet back to pre-lockdown levels

As per the data available on the Vahan dashboard, the total number of vehicles registered crossed the 20 lakh mark in March 2020, only for the second time between January 2019 and October 2020. The first was in November 2019 when this number touched 22.73 lakh. The number of vehicles registered in March 2020 was about 23.2 lakh, the highest monthly registrations since 2016. In 2019, the total number of registrations had recorded a negative growth of 5.52% indicating the downturn in the industry. Though the number of registrations has been continuously increasing since June 2020, the figures are nowhere near the 2019 levels. 

Compared to the corresponding months in 2019, the number of vehicle registrations had gone down by more than 78% in April 2020 and 88% in May. In the months of June, July, and August 2020, the registrations were down by 41%, 35%, and 25.4% respectively compared to the same months in 2019. In the month of September 2020, the registrations were only 8.4% less than 2019. However, in October 2020, the registrations were again down by 23% compared to the 2019 figures. 

Festival season is when most sales happen

Usually, the retail sales of vehicles are higher during the festive season in the period between September to November, as this period is considered auspicious by many. If the data for September & October together is compared, then the retail sales numbers are down by 16.6% in 2020 compared to 2019. 

The data from the Vahan dashboard reveals that the registration of vehicles is the highest in the month of November every year. Whether the automobile retail sales will improve and return to the earlier levels will be known when the data for November 2020 is released.  

Number of Tractors registered has increased manifold

The data on vehicle registrations released by the Federation of Automobile Dealers Associations (FADA) in collaboration with MoRTH is based on Vahan data. According to FADA, throughout the months from July to October 2020, there has been a drop in the sale of two wheelers, three wheelers, and commercial vehicles compared to the same months in 2019. The sale of all passenger vehicles witnessed a positive growth only once, that too by 9.8% in September 2020 compared to September 2019. The growth in the sale of passenger vehicles was negative in the rest of the months. The reduction in three-wheeler registrations has been above 50% throughout the four months. 

The sales of only one type of vehicles, Tractors, had witnessed a consistent and positive growth in these four months. The number of tractors getting registered increased by 37.2% in July 2020, 27.8% in August, 80% in September, and 55.5% in October 2020 compared to the same months in 2019.  The possible reason behind the increasing number of tractors could be the increased agricultural activity on account of a good monsoon as well as reverse migration that took place during the lockdown.  

More people are transferring ownership of Vehicle

The Vahan data also indicates that number of incidences of ownership transfer has increased from around 4.93 lakhs in June 2020 to 7.53 lakhs in September 2020. The Year on Year (YoY) comparison also indicates an increase in the number of such transfers by almost 24% in September 2020 and 17.58% in October 2020, compared to the same months in 2019. Transfer of ownership may be representative of the sale of used vehicles. In other words, the sale of used vehicles could have increased either because of the propensity to travel in private vehicles or because of distress sale. 

In a recent media release, FADA has highlighted a few issues that the dealers may face in the coming months. One is the hindrance in procuring spare parts from Europe due to the second wave of infections & increased lockdown measures. This may result in a supply demand mismatch and would affect the sale of passenger vehicles. Secondly, post festival, the demand might reduce and hence, the dealers must keep an eye on the inventory levels. The dealers’ financial health may be affected due to this, as per FADA.

New and innovative techniques for sale must be adopted

According to a study by KPMG, for the automobile industry to recover, it is necessary that they adopt to new measures and changed preferences of people. First, though there may be an increase in number of people opting for private transportation, the ability of people to afford and buy amidst such pressing times must be considered. Thus, innovative purchasing schemes are necessary. Secondly, more people are opting for digital transactions and online shopping. Hence, offering services at doorstep like booking, finance and delivery through contactless transfer will be useful. New and innovative online marketing techniques may be useful since people spend most of their day online. Similarly, new innovative features such as anti-bacterial surfaces might be a hit.

Like many other sectors, the automobile sector is also badly hit because of the pandemic. It remains to be seen if the recovery takes more than a year or so. 

Featured Image: Vehicle Registrations

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