Thursday, July 18, 2024

    Auto Sales January 2024: Indian retail market auto sales rise by 15 percent


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    January 2024 saw a strong growth across for all vehicle categories in India, with the overall auto retail market expanding by 15% on YoY basis. As per the data from Federation of Automobile Dealers Associations (FADA), the Two-wheelers (2W) led the charge with 15% growth, followed by three-wheelers (3W) at 37%, passenger vehicles (PV) at 13%, tractors (Trac) at 21% and commercial vehicles (CV) at a modest 0.1%.

    Commenting on January’24 Auto Retails, FADA President, Mr. Manish Raj Singhania said, “January 2024 began on a promising note for the calendar year, demonstrating 15% overall retail growth compared to the previous year. All vehicle categories – 2W, 3W, PV, Tractors, and CV – achieved positive YoY growth of 15%, 37%, 13%, 21%, and 0.1% respectively.”

    Two wheeler segment

    Demand for 2Ws remained steady, fuelled by continued strength in the rural market. This segment is likely to benefit from the Government’s good crop production estimates and continued support for the rural economy.

    Several positive trends in the two-wheeler market signalled a robust start to the year. Improved vehicle availability, due to adjustments post-BS6 OBD 2 norm implementation, the introduction of new models and a shift towards premium options all contributed to increased demand. This, combined with a good harvest, a positive marriage season and effective follow-ups and offers, indicate a favourable trajectory for the two-wheeler sector. Furthermore, despite supply shortages, increased interest in electric vehicles highlights evolving consumer preferences within this segment.

    Three wheeler segment

    The Three-wheeler sector showed a mixed landscape. While growth and optimism continue within the commercial three-wheeler market, intensified competition from electric models underscores a significant market shift – now 55% electrified. January 2024 presented a complex scenario for the commercial vehicle (CV) segment, demonstrating limited YoY growth. On one hand, increased infrastructure development, port activity and positive crop yields fuelled certain market segments. However, this momentum was hindered by extreme weather, tightened liquidity, high vehicle costs and more restricted financing.

    Passenger vehicle segment

    The passenger vehicle segment achieved a new all-time high in January, retailing 3,93,250 vehicles and surpassing the previous record set in November 2023. However, a persistent concern lies in high inventory levels, which still hover in the 50-55-day range, posing a challenge for auto dealers.

    This calls for immediate recalibration of production from OEMs to better align with actual market demand and avoid future oversupply issues. As adaptability is crucial in this dynamic industry, OEMs must balance innovation with strategic production planning to ensure sustained success and overall market stability.

    Tractor segment

    Tractor sales saw a positive uptick after a slowdown in previous months, likely driven by anticipation of a good Rabi crop output and favourable weather conditions for wheat cultivation.

    Commercial vehicle segment

    The commercial vehicle segment might experience a slight demand taper in the fourth quarter due to a high base effect and upcoming elections. However, long-term fundamentals remain positive, with expectations of a post-election rebound as underlying industries resume tender processes.

    The government’s optimistic crop production estimates and continued support measures are expected to boost the rural economy, potentially leading to even higher tractor demand and increased sales of entry-level 2Ws in rural areas.

    Several factors are poised to fuel growth in various sectors. Firstly, the ongoing marriage season and anticipated income from agricultural sales are key demand drivers, providing a solid basis for sustained consumer spending and bolstering growth in the 2W segment. Additionally, the momentum of new launches, coupled with increased vehicle availability and successful introductions of new models across all segments, holds promising potential to stimulate market demand further.

    Moreover, the impact of favorable post-Union Budget policies is expected to be significant, particularly in driving growth within the commercial vehicle (CV) sector, especially in infrastructure-related industries. Lastly, with the government’s optimistic crop production estimates and continued support measures, there is a potential for further growth in the rural economy. This could lead to heightened tractor demand and increased sales of entry-level 2Ws in rural areas, contributing to overall market expansion.

    Navigating the automotive industry presents a myriad of challenges and market complexities. Foremost among these is market uncertainty, particularly heightened by the anticipation of upcoming elections, which may instill caution among consumers, impacting purchasing decisions across various vehicle segments. Compounding this uncertainty are persistent supply constraints, particularly evident in high-demand models, posing a risk to consistent growth across two-wheeler (2W), commercial vehicle (CV), and passenger vehicle (PV) segments.

    Addressing these challenges necessitates a strategic approach from original equipment manufacturers (OEMs), emphasizing optimization of production lines to mitigate supply bottlenecks. Additionally, fluctuating market liquidity and the potential for tighter financing, especially in the CV sector, underscore the importance of developing robust consumer financing solutions to bolster overall sales. Despite these hurdles, the industry outlook leans towards cautious optimism, with indications of growth potential in the near term. Adaptive strategies and prudent management will be vital for stakeholders to navigate through these complexities and capitalize on emerging opportunities in the automotive market.