Vehicle sales in India show double-digit growth; tractors however continue to underperform

New Delhi [India], August 5 (ANI): Retail automobile sales in India saw double-digit yearly growth in July, with almost all vehicle categories witnessing an increase. To be precise, the sales jumped 13.84 per cent during the month.

As per data released by the Federation of Automobile Dealers Associations (FADA) on Monday, two-wheelers sales grew by 17 per cent, three-wheelers by 13 per cent, passenger vehicles by 10 per cent, and commercial vehicles by 6%.

Tractors, however, continued to underperform, falling by 12 per cent, on a yearly basis.

According to the dealers’ association, the two-wheeler segment experienced notable growth due to a “thriving” rural economy, positive monsoon effects, and government support programs enhancing rural incomes. The introduction of new products and better stock availability also contributed significantly, despite market slowdowns in certain regions, excessive rains, and increased competition. The segment also saw an increase in EV sales due to discounts and the Electric Mobility Promotion Scheme deadline.

Electric Mobility Promotion Scheme 2024 (EMPS) with an outlay of Rs 778 crore for a period six months, April 2024 till September 2024, provides incentives to buyers of e-2W and e-3W.

Further, passenger vehicle sales saw a robust 14 per cent growth, driven by new model launches and attractive pricing strategies. Nonetheless, heavy rains, low consumer sentiment, and intense competition posed challenges.

Overall, however, this sales growth is accompanied by a significant concern. The association asserted that the inventory levels have surged to a historic high of 67-72 days, equating to Rs 73,000 crores worth of stock.

This, it said, poses a substantial risk for dealers, necessitating extreme caution. The association urges passenger vehicle makers to be vigilant about potential dealer failures due to these high inventory levels.

Commercial vehicle retail sales showed a 6 per cent yearly growth, with dealers reporting mixed sentiments. Positive factors included growth in the construction and mining sectors, while challenges such as continuous rainfall, and a relatively negative rural market sentiment, among others.

“Some dealers achieved growth through small bulk deals and leveraging increased market reach and product acceptability,” said FADA Vice President CS Vigneshwar.

Outlook:

According to the association FADA, the near-term outlook across the auto retail segments is a blend of optimism and caution. Two-wheeler sales are expected to be buoyed by factors such as a growing rural economy, positive monsoon impacts, and the introduction of new products.

The festive season beginning and favourable agricultural conditions are also likely to contribute to increased sales. However, heavy rainfall, ongoing agricultural activities and inconsistent monsoon patterns may dampen demand in certain areas, it cautioned.

Passenger vehicle sales could see mixed results. While the festive season, attractive schemes and good monsoon are expected to boost sales, high inventory levels pose a significant risk and it is crucial for makers to avoid further increases in stock to prevent financial strain on dealers.

Weather forecast:

The Indian Meteorological Department (IMD) predicted that rainfall in the second half of the monsoon season (August-September) is likely to be ‘above normal’.

FADA says excessive rains could lead to city flooding, floods in low-lying areas and landslides in hilly regions, potentially impacting auto retail sales.

“The auto retail market is cautiously optimistic for the near term, driven by positive monsoon effects, the festive season, and some product launches. Nonetheless, challenges such as heavy rainfall, high inventory levels in the PV (passenger vehicle) segment, and economic uncertainties warrant caution. Effective inventory management and stringent financial checks are essential to sustain growth and mitigate financial risks, ensuring the stability and health of the auto retail sector,” FADA said.

“We expect good volume trajectories across segments, with 2Ws outstripping others. We expect 11 per cent FY25 volume growth for 2Ws, 7 per cent for medium and heavy CVs, 6 per cent for tractors and 4 per cent for PVs. We retain our sanguine view of the auto sector,” commented financial services firm Anand Rathi.