The narrative for the Indian auto industry has been bleak coming out of the pandemic, with the sector hit by rising costs, supply challenges and weak demand. And the clouds didn't part in January: retail sales for the auto industry across all segments fell 10.7% YoY to 14,39,747 units in January 2022. Car sales are down 10.1% to 2,58,329 units. But one thing to note here is that although Maruti Suzuki, Tata Motors, and Mahindra & Mahindra’s wholesales are erratic month-on-month from October 2021 to January 2022, retail sales are looking up.  

With the rise in input costs leading to a rise in car prices, the rising car retail sales might signal some hope for the India’s auto industry amid a stalled recovery. There is still plenty of catching up to do: when we look at retail sales on a year-on-year basis, market leader Maruti Suzuki’s retail sales fell 15% YoY in January 2022 to 1,20,114 units, but rose 15.4% MoM. Tata Motors’ retail sales grew 37% YoY to 32,408 units (up 4.7% MoM) while Mahindra & Mahindra’s car retail sales grew 22% to 18,638 units (up 4.2% MoM)

Another point to note here is the data put out by the Economic Survey of India for 2021-22. The survey said the Indian passenger vehicle industry had a backlog of nearly seven lakh cars as of the end of December 2021. This means many customers are waiting for the delivery of their cars. But supply chain issues are causing long delays. A study in late 2021 also showed that nearly half of first-time buyers were preferring used cars to new cars. This might reduce future retail sales for car companies. So, while retail sales may be rising, carmakers maybe now competing with used cars as they work to liquidate the inventory at their dealerships.