Russia-Ukraine conflict: FADA downgrades vehicle sales outlook to negative

Sales of passenger vehicles (PVs) was down 7.84% to 2.38 lakh vehicles

The Federation of Automobile Dealers Associations (FADA) on Friday revised downwards its outlook for the already struggling Indian automobile sector from ‘neutral’ to ‘negative’ as the Russia-Ukraine conflict is expected to negatively impact the global automobile supply chain.

“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,” the industry body said.

It added that there are concerns over the shortage in semiconductors creating additional supply side issues for passenger vehicles. “Till the time Russia — Ukraine conflict doesn’t come to an end, FADA changes its outlook from ‘neutral’ to ‘negative’,” it said.

Russia is one of the largest producers of rare-earth metals, especially Palladium, which is an essential metal for semiconductors, while Ukraine is one of the biggest producers and exporters of Neon Gas that is used in the manufacturing of semiconductors.

“With crude breaching the $110 mark, the government will not be able to hold prices of petroleum products for long. Post state election results, oil marketing companies will increase fuel prices by at least ₹10-15,” the industry body said, adding that while this will act as an obstacle for two-wheeler sales, the opening of educational institutions and offices along with the upcoming festival of Gudi Padwa, two-wheelers and buses may see an increased interest.

As per the data released by FADA, total retail vehicles sales in the country fell 9.21% to about 13.74 lakh units last month from over 15.13 lakh units in February 2021. The sales were down 20.65% when compared to February 2020 sales of over 17.32 lakh.

Sales of passenger vehicles (PVs) was down 7.84% to 2.38 lakh vehicles, while that of two-wheelers and tractors fell 10.67% to about 9.83 lakh units and nearly 19% to 50,304 units, respectively. Commercial vehicle sales were up 7.41% to 63,797 units.