Auto Retail Sector Sees An 8% MoM Dip
FADA pins hopes on upcoming festive season for sales to pick up
MUMBAI, July 6 (The CONNECT) – The passenger vehicle segment navigated through a mixed landscape characterized by variable demand, dynamic product portfolios and oscillating market sentiments, the Federation of Automobile Dealers Associations (FADA) today said.
FADA commended Maruti’s swift action to facilitate clearance of slow-moving model stockpiles by underwriting dealer interest costs, contributing positively to the segment.
With dealers noting sporadic supplies of popular models and aging product concerns of slow moving variants, the segment still experienced an uptick in demand for new models and anticipates rural sales to pick up further pace, the association said releasing the vehicle retail data for June ’23..
FADA President Manish Raj Singhania stated, “Despite a 10% YoY growth, Auto Retail sector has seen an 8% MoM dip, indicating a short-term deceleration in sales”.
The passenger vehicle segment faces a dichotomy of factors. While the launch of new models and potential rise in rural sales lend optimism, dealers navigate inventory pressures from OEMs and demand-supply mismatches, impacting profitability. However, the anticipation of a boost from the upcoming festive season in end-August offers a hopeful outlook. The commercial vehicle sector contends with a balance of positive market sentiment and potential monsoon impacts, with demand spurred by infrastructural projects and improved financing options.
Analysing individual categories on a YoY basis, 2W, 3W, PV, Tractor and CV segments observed growth rates of 7%, 75%, 5%, 41% and 0.5% respectively. In comparison to pre-COVID levels, the overall auto retail marked a marginal decrease of 3%, with 2W as the sole laggard. Conversely, the CV segment experienced a 1.5% growth compared to June’19, surpassing the pre-COVID levels for the first time, Singhania said.
Despite some short-term contraction, India’s growth narrative remains resilient. The month of June’23 registered all-time highs for 3W, PV and Tractor segments when compared to all the previous June’s.
The two-wheeler sector wrestled with supply constraints from certain OEMs and a softer demand attributed to economic conditions and higher entry-level bike costs. New model introductions, festive promotions and seasonal factors couldn’t markedly boost sales. A 12% MoM drop was observed in two-wheeler sales, with electric vehicle sales witnessing a 56% MoM decline, primarily due to the government reducing FAME subsidies, triggering extreme price hikes.
June’23 witnessed the 3W market’s robust growth, primarily owing to the previous year’s low base effect and positive market sentiment. The shift towards alternative fuels, predominantly EVs, continues to play a significant role in driving this growth, despite potential supply concerns due to non-availability of OBD2 vehicles, FADA said.
The CV (commercial vehicle) segment confronted mixed dynamics influenced by inconsistent demand, supply issues, government policies and external market factors. Despite fluctuating demand and vehicle availability issues, the government’s infrastructural push and coal mining growth spurred demand for heavy commercial vehicles, counteracted by high-interest rates and rising prices, Singhania said.
The association said July’23’s Auto Retail Outlook signals mixed trends. The two-wheeler market anticipates continued supply challenges and economic pressures, despite new schemes and expectations of monsoon-boosted sentiment. Meanwhile, the cutback in FAME subsidies casts a shadow over EV sales. Conversely, the three-wheeler market predicts growth, underpinned by favourable market responses and rising demand.
On the agricultural front, erratic monsoon rainfall in India is hindering crop sowing. The delayed and uneven rains may reduce crop yields, shorten crop cycles and cause a delay in future crop arrivals. Such developments may affect the sales of automobiles, particularly in rural areas where a weak agricultural season could lead to a reduction in disposable income, thus affecting demand for two-wheelers and entry-level cars. Yet, upcoming rains may potentially boost agricultural prospects, revive rural demand, and positively influence automotive sales. FADA hence remains cautiously optimistic for near term outlook.