New Delhi, Jan 5 (IANS): The reimposition of restrictions due to the rise in Covid cases is expected to impact demand for automobiles, especially for passenger vehicles and two-wheeler, ratings agency Acuite said on Tuesday.

"The domestic sales recorded a contraction of 7 per cent YoY during December 2021 driven by persistent global shortage of semiconductors and a longer waiting period for many models," the ratings agency said.

On sequential basis too, sales declined marginally, thereby highlighting weakness in demand.

The shortage of semiconductors may continue to disrupt passenger vehicle production and despatches over the next few months.

For two-wheelers, Acuite said it expects a recovery in sales in the near term due to the seasonal rise in farm incomes. However, the fresh rise in Covid cases triggered by the emergence of new variant Omicron across the country may delay the revival.

For commercial vehicles, it is bullish as infrastructure creation and construction activities are gaining momentum in the core sectors. Outlook for the CV segment is positive for the medium term.