Indian auto retail experienced a robust 13% YoY growth in February 2024: FADA

The Federation of Automobile Dealers Associations (FADA) Thursday released the Vehicle Retail Data for February 2024.

In February 2024,Indian Auto Retail experienced a robust 13% YoY growth across all vehicle categories. 2W, 3W, PV, Tractors and CV sectors registered growth rates of 13%, 24%, 12%, 11% and 5% respectively, said Manish Raj Singhania, President, FADA.

The 2W market’s 13% YoY growth was driven by the rural sector, premium model demand, and strong entry-level segment performance, with broader product availability and compelling offers enhancing product acceptance. Factors like favourable marriage dates and improved economic conditions also contributed to this positive growth.

The 3W market saw a significant 24% YoY increase, with EVs constituting 53% of this growth, highlighting a shift towards Electric E-Rickshaws and an increase in first-time users.

The PV segment has exhibited an impressive 12% YoY growth, achieving the highest sales figures ever recorded for the month of February. This upward trajectory was propelled by the strategic introduction of new products and enhanced vehicle availability. While the sector benefits from favourable customer sentiment and the successful introduction of models in high demand, the persistently elevated inventory levels, remaining at 50-55 days, present a significant concern.

It is imperative for PV OEMs to undertake adjustments in production to mitigate these high inventory levels, thereby reducing the financial burden of carrying costs on dealers as it is vital for maintaining the financial health of dealers. Adopting this forward-looking stance is essential for ensuring the sustained growth and vitality of this segment.

The CV segment grew by 5% YoY, overcoming challenges through fleet purchases and school buses, strong sectoral demand and improved financing, despite obstacles like cash flow shortages and election-related purchase deferrals, highlighting the sector’s resilience and gradual recovery, FADA said in its report.

Near-term outlook:

For the near-term outlook, the auto retail sector is influenced by a blend of positive trends and challenges. The rural sector’s robust signals, along with an increased demand for premium and entry-level segments, are set to bolster the 2W market. Similarly, both the 3W and CV sectors anticipate a boost in sales, driven by the financial year-end rush and an infusion of funds into the market, which is expected to stimulate purchases. In the PV sector, the confluence of financial year-end buying incentives, improved availability of vehicles and seasonal factors such as marriages is likely to propel demand.

However, the anticipation of elections casts a shadow over this positive scenario, with potential deferred purchases across segments. The commercial vehicle sector, in particular, might face a cautious approach from customers waiting for the outcome of general elections. Supply constraints further complicate the landscape, especially in the PV segment, where the availability of popular variants remain a concern. External factors like crop failures in rural areas could also dampen market sentiment and financial liquidity, posing additional hurdles to sustained growth.

Overall, the near-term outlook for March 2024 in the auto retail sector is one of cautious optimism. Financial year-end activities traditionally spur purchasing across segments, yet the feedback from dealers highlights the nuanced challenges of inventory management, extremely aggressive target settings and evolving consumer preferences. OEMs’ ability to address these challenges through strategic product introductions, supportive dealer policies and adaptive sales strategies will be paramount in maintaining the sector’s growth momentum and achieving success in in the near term.