Indian Auto Industry Witnesses 5% M-o-M Decline In Retail Sales

Auto retail sales in July maintained a steady 10 per cent YoY growth, mirroring the previous month. Notably, all vehicle categories recorded positive figures: Two-Wheelers (2W) at 8 per cent, Three-Wheelers (3W) at 74 per cent, Passenger Vehicles (PV) at 4 per cent Tractors (Trac) at 21 per cent, and Commercial Vehicles (CV) at 2 per cent.

Despite the consistent YoY growth, the month-on-month trend observed a 5 per cent decline in retail sales. The exception was the 3W segment, which grew by 9 per cent, while categories like 2W, PV and Trac, registered reductions of 6 per cent, 4 per cent, 8 per cent. CV closed flat at -0.2 per cent.

When compared with pre-covid figures, overall retails showed a 13 per cent decline. The 2W segment grappled with a significant 23 per cent dip, while CVs also underperformed with a 4 per cent contraction.

July was particularly commendable for the 3W category, which registered an all-time high sale of 94,148 units, translating to a 74 per cent YoY and 9 per cent MoM growth, surpassing 86,857 units, the previous high of March’23.

Reflecting on July 2023, FADA President, Manish Raj Singhania said, "Despite challenges like heavy monsoons and a tilt towards EVs due to high fuel prices, 2W showed resilience in July '23, with increased demand and trust in reputable brands. The 3W segment's record numbers indicate industry potential and a growing EV interest. Yet, addressing issues like OEM support and dealer engagement remains crucial.

PV sales in July '23 were a mix of challenges and triumphs. The month saw a surge in orders and timely OEM supplies, especially with the introduction of new products. However, severe monsoons and flood like situations especially in North India, impacted sales. SUVs continued to remain a popular choice.

 The CV segment showed mixed dynamics. Despite robust stock availability and growth in areas like school buses, challenges from erratic weather and high vehicle costs affected demand. However, infrastructure project boosts remain a silver lining."

Near Term Outlook

The automotive industry is poised for an intriguing August, marked by a blend of opportunities and challenges. Across the board, there are common positive indicators echoing hope. The 2W sector expects an uptick, driven by upcoming festivals, a harmonious supply-demand equilibrium and the rollout of new models. The 3W category, too, is witnessing a surge in interest, particularly towards electric variants. In the realm of CV, the anticipation of the festive season, the aftermath of a good monsoon and pent-up demand set the stage for potential growth. Similarly, the PV segment is likely to benefit from festive euphoria and new product introductions coupled with high demand in SUV category.

However, challenges loom on the horizon. The 2W segment's entry-level category continues to be a cause for concern. In the CV space, there are apprehensions regarding streamlined loan disbursements for buyers. Inventory level in PV has breached 50 days mark in anticipation of upcoming festival season and the slowdown in entry-level car remains. A larger concern is the IMD's projection of below-average rainfall in August, potentially leading to lower crop yields. This could impact purchasing power, especially in rural regions. While the industry has experienced a tepid trend over the past two months, FADA remains watchful in the short term. Nonetheless, there's optimism about a rise in retails as we approach the festive season.

 Expectation from August

♦ Growth -59.84 per cent

♦ Flat -30.52 per cent

♦ De-growth - 09.64 per cent

Average inventory for Passenger Vehicles ranges from 50-55 days

Average inventory for Two – Wheelers ranges from 20-22 days

The chart below shows the vehicle retail data for July’23

Source: FADA Research