Vehicle sales grow by 16% in February 2023, still 8% below pre-pandemic levels: FADA

Two-wheelers, 3-wheelers, passenger vehicles, tractor and commercial vehicles grew by 15%, 81%, 11%, 14% and 17% respectively, according to Federation of Federation of Automobile Dealers Associations (FADA).

On YoY basis, total vehicle retail sales in February 2023 grew by 16% as all categories witnessed double digit growth. Two-wheelers, 3-wheelers, passenger vehicles, tractor and commercial vehicles grew by 15%, 81%, 11%, 14% and 17% respectively, according to Federation of Federation of Automobile Dealers Associations (FADA).

Commenting on how February’23 performed, FADA President, Mr. Manish Raj Singhania said, “February’23 continued to witness double digit growth of 16% YoY but was still down by -8%, when compared to pre-covid month of February’20. All categories also witnessed double digit growth with 2-Wheeler, 3-Wheeler, Passenger Vehicle, Tractor and Commercial Vehicles growing by 15%, 81%, 11%, 14% and 17% respectively on YoY basis.

The 2-Wheeler category witnessed a growth of 15% YoY but was down by -14% when compared to pre-pandemic level of February’20. 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 has kept the customers at bay.

The 3-Wheeler segment has seen 81% growth YoY and has also grown by 3% when compared to precovid month of February’20. This category has seen a drastic growth due to Central & State Government’s subsidy along with good scheme promotion done by the states. Along with this, aggressive finance schemes continues to aid growth for this category.

The Passenger Vehicle segment saw a growth of 11% YoY and 16% when compared to pre-covid month of February’20. Launch of new models, continuously improving supply coupled with healthy booking to cancellation ratio and wedding bells kept the momentum going for this already well to do segment.

The Commercial Vehicle category has also shown robust growth by growing 17% YoY though it fell by – 10% when compared to pre-covid month of February’20. Walk-in enquiries improved during the month. Apart from this, demand has also increased due to change 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.”

The inability of the rural sector to spend because of inflation is a key deterrent to automobile sales, FADA said. The US government weather agency, National Oceanic and Atmospheric Administration, in its forecast earlier this month had predicted that El Niño could return as early as June, when the southwest monsoon sets over the Kerala coast. This may act as a threat to normal monsoon and thus impact automobile sales going ahead, the association added.

Near term outlook

The month of March has multiple festivals like Holi, Ugadi, Gudi Padwa, Navratri etc. This will help push auto sales. Apart from this, 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 then 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.

Apart from this, the Finance Ministry has released a statement that the predictions of a return of El Niño 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 March looks good for auto sales, on a medium-term outlook, FADA remains cautious till the time a better monsoon forecast is announced by IMD.