With economic recovery, tractor demand outshines supply for six months in a row: FADA

Tractor demand continues to be robust and continued to outshine supply for six straight months further confirming that India’s economy is recovering, said Federation of Automobile Dealers Associations (FADA) on Monday.

The government’s approval for ₹12,000 crore infrastructure projects will see its positive effects in the commercial vehicle (CV) space. However, full recovery is only expected in all the industry segments from April onwards, it said while sharing the vehicle registrations of December.

"The CV segment continues to see demand pressure even though on a YoY basis, the segment fell by 13.5 per cent due to lower base. Increased intra-city goods movement continued to help Light commercial vehicle (LCV) outperform medium and heavy commercial vehicle (M&HCV) segment as Axle load norms, increased fuel and vehicle cost and higher freight rates continued to play spoilsport," Vinkesh Gulati, President, FADA said.

While December saw good spillover demand continuing from the festive season and pre-buying due to price hike announcement, demand for vehicles in January looks bleak. Passenger vehicle (PV) may witness growth if the demand-supply mismatch is resolved. With recent hikes announced by all original equipment manufacturers (OEMs), FADA expects a temporary blip in demand as customers will take time to absorb the same, he said.

With no further price hike shocks, demand spurring budget by the government, Covid vaccine’s effectiveness to fight the current and the new strain of the virus with no/minimal side effects, FADA remains guarded in its optimism for auto sales during last quarter of this fiscal year, he added.

Spike in December registrations

Meanwhile, the Association reported that December registrations for the first time in the fiscal year 2020-21 witnessed a positive growth of 11 per cent year-on-year (YoY) largely due to festival spillover demand and pre-buying to the announcement of price hike in January.

In the PV segment, the registrations grew 24 per cent YoY to 2,71,249 units as compared with 2,18,775 units in December 2019.

Similarly, two-wheelers (2W) registrations registered a growth of 12 per cent to 14,24,620 units during last month as against 12,73,318 units in the corresponding month previous year.

Tractor registrations were recorded at 69,105 units during last month as against 51,004 units in December 2019.

However, CV registrations declined by 13 per cent YoY to 51,454 units compared with 59,497 units in corresponding month 2019.

On inventory levels, average inventory for PV ranges from 15-20 days, while average inventory for two-wheeler ranges from 30-35 days, FADA added.

All India Vehicle Registration Data for December’20

Source: FADA Research