The automotive retail sales in India achieved the best-ever performance in November, barring March 2020 when retails were higher due to the BS IV to BS VI transition.
According to the data released by the Federation of Automobile Dealers Association (FADA) the auto retail sales touched 23,80,465 units across two-, three-, four-wheeler, commercial vehicle and tractors, which is 26 percent higher on YoY basis, as well 13.6 percent higher over the month of October.
On the other hand, when compared with November 2019, a pre-covid month, total vehicle retail closed in marginally positive territory with an increase of 1.5%. Except the two-wheeler segment, which saw a marginal dip, all the other categories were in green with three-wheeler, passenger vehicle, tractor, and commercial vehicle growing by 4 percent, 5 percent, 61 percent and 6 percent respectively.
The auto industry body says in addition to the festive sales, the wedding season which continues from November 14 to December 14 has played its part in accelerating auto retail sales.
Manish Raj Singhania, President, FADA said, “The baton was passed by the positive run of festive sales to the great Indian wedding season where around 32 lakh weddings will be solemnised across the country. All categories were in the green with 2W, 3W, PV, Tractor, and CV growing by 24%, 80%, 21%, 57%, and 33% respectively. The two-wheeler segment showed a huge growth of 24% YoY but fell marginally by 0.9%, when compared to Nov 2019, a pre-covid year. This segment is slowly turning the tides from negative to positive as the same can be witnessed from retail sales due to the ongoing wedding season.”
He further stated that the three-wheeler segment showed a massive growth of 80 percent YoY and 4 percent when compared to 2019. The category which was witnessing low demand during Covid has now emerged as the highest growing category due to positive sentiments and fear of lockdowns out of mind. Electrification in the category continues at its highest pace.
On the four-wheeler side, the passenger vehicle segment witnessed a healthy growth of 21 percent YoY and 5 percent compared to 2019. Improvement in the availability of model mixes, new launches, and an increase in rural demand continued to aid the growth. The compact SUV and SUV category coupled with higher variant models continues to rule to roost.
“The CV witnessed a growth of 33% YoY and 6% compared to 2019. With the government’s continued focus in the infrastructure space and new mining projects, replacement demand continued to pour in along with healthy inter-state passenger movement enabling bus sales,” added Singhania.
Increase in product price, repo rate may slowdown growth
The RBI’s latest Consumer Confidence Data suggests that buoyancy among customers is on a recovery path on account of better perceptions of the general economic situation, employment, and household income. This along with the ongoing festive season has continued to help in bringing customers to the showrooms as of date.
FADA says for rural India, normally after the harvest starts, farmers get money in hand, and this starts the spending cycle. It expects spending for auto sales to go up once the harvest comes into the market and farmers start getting money in their hands.
On the other hand, most OEMs have started announcing price hikes, to counter this and for the lower end of the pyramid, they have started offering discounts for slow-moving products, lower variants and to clear their year-end stocks. This may help year-end sales to remain healthy.
While the above actions are positive, RBI yesterday increased the repo rate by 35 bps (225 bps increase since May 2022) and continues to hint at more hikes in the future. This increase now brings the repo rate to 6.25 percent, the highest since Feb 2019.
This will further lead to a higher cost of borrowing apart from the price hikes done by OEMs and may dent consumer confidence, especially in the two-wheeler and entry-level passenger vehicle segment. Along with this, the China lockdown may play its part in slowing the supply of semiconductors. If this happens, it may act as a speed-breaker and add to the supply-demand mismatch which was improving in the last few months.
Due to the above reasons, FADA says it remains cautiously optimistic in the near term.
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