Auto retail sees YoY improvement, but still behind pre-Covid levels says FADA

The automotive retail sales is witnessing significant improvement but still lags behind when compared to pre-Covid levels. In fact, as per the data released by the Federation of Automobile Dealers Association (FADA) for the month of February, the overall automotive retail came at 17,75,424 units, which was 15.95 percent higher YoY.

Manish Raj Singhania, President, FADA said, “February continued to witness double-digit growth of 16 percent YoY but was still down by 8 percent, when compared to pre-covid month of February 2020. All categories also witnessed double-digit growth with two-, three-wheeler, passenger vehicle, tractor and commercial vehicles growing by 15 percent, 81 percent, 11 percent, 14 percent and 17 percent respectively on YoY basis.”

On the other hand, when one looks at the two-wheeler category in compared to pre-Covid period, it was down 14 percent. The change in OBD norms which comes into effect from April along with marriage season kept the sales ticking. On the overall, high inflation and poor sentiment kept the customers at bay.

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The three-wheeler clocked growth of 3 percent when compared to February 2020. “This category has seen drastic growth due to Central and State government’s subsidy along with good scheme promotion done by the states. Along with this, aggressive finance schemes continue to aid growth for this category,” added Singhania.

The passenger vehicle segment saw a growth of 11 percent YoY and 16 percent when compared to February 2020. Thanks to new model launches which continuously helped improve supply along with a healthy booking-to-cancellation ratio and wedding bells driving the momentum for the already well-to-do segment.

“The commercial vehicle segment also saw a robust growth of 17 percent YoY, but fell by 10 percent when compared to February 2020. The walk-in enquiries improved during the month. Apart from this, demand has also increased due to changes in OBD norms which is will see price hikes. On the government’s side, infrastructure spending has been healthy. This is also aiding better sales,” stated Singhania.

FADA remains cautious for coming months

The auto retail body states that the month of March which sees multiple festivals like Holi, Ugadi, Gudi Padwa and Navratri among others will help push auto sales. In addition, better availability of vehicles, last month of the Financial Year, change in OBD norms from April which will increase vehicle prices, the industry may see schemes being rolled out by the OEMs thus aiding higher sales.

“On the flipside, India’s chief economic advisor said that urban demand recovery is taking place at a faster pace than rural. This along with sharp slowdown in private consumption expenditure to a 2-year low suggests a softening in household spending demand amid inflationary pressure as post covid pent-up demand starts to fade,” he added.

He further stated that the Finance Ministry’s statement on the predictions of a return of El Nino conditions in the Pacific could presage a weaker monsoon in India, resulting in lower output and higher prices. This will act as a dampener for auto sales.

While the month of March looks good for auto sales, on a medium-term outlook, FADA remains cautious till the time a better monsoon forecast is not announced by IMD.