Semiconductor shortages continued to impact the auto sector with passenger vehicles retail sales slumping about 11 per cent year-on-year in December, automobile dealers’ body FADA said on Wednesday.

With the third wave of the coronavirus sweeping the country and several state governments announcing restrictions, the auto dealers said this would have a negative effect on sales.

“Various state governments have once again announced Covid restrictions. Work and education from home have resumed and will have a negative effect for auto retail.

“With the fear of health care expenses rising again, the customers are shying away from closing their purchase decisions… the association will remain cautious over the next two-to-three months,” FADA said in a statement.

Data showed that the passenger vehicle (PV) retail sales last month fell 10.91 per cent to 2,44,639 units from 2,74,605 units in December 2020.

Auto sales in India declined 16.05 per cent in December 2021 compared with December 2020; a total of 15,58,756 vehicles were sold by dealers in India last month as opposed to 18,56,869 units in December 2020.

"The month of December is usually seen as a high sales month where OEMs continue to offer best discounts to clear the inventory due to change of the year. It was, however, not the case this time around as retail sales continued to disappoint, thus wrapping up an underperforming calendar year," FADA President Vinkesh Gulati noted.

With semiconductor shortage continuing to play spoil-sport, passenger vehicle sales in spite of huge bookings in December closed in red, he added.

Dealers, however, saw slight ease in vehicle supply, thus giving some hope of improvement, Gulati stated.

Two-wheeler sales also continued to remain in the slow lane last month, with sales of 11,48,732 units, down 19.86 per cent from 14,33,334 units in December 2020.

"High cost of ownership, bad rural sentiment, work from home and the latest threat of Omicron continued to impact sales," Gulati noted.

Commercial vehicle retail sales, however, rose 13.72 per cent last month to 58,847 units, as against 51,749 units in December 2020.

"The government's push for infrastructure spending especially in road infrastructure, better freight rates, price hike announcement in January and a low base helped the overall segment close in positive double digits," Gulati stated.

Overall retail sales across segments last month stood at 15,58,756 units, down 16.05 per cent from 18,56,869 units in December 2020.

The Federation of Automobile Dealers Associations (FADA), which collated data from 1,379 out of 1,590 RTOs across the country, said it remains extremely cautious over the next 2-3 months with yet another wave of COVID impacting the business.