“Financial Year 2024 began on a subdued note, with the month of April experiencing a 4% YoY overall decline,” said Manish Raj Singhania, President, FADA (Federation of Automobile Dealers Associations).
Vehicle retail data for April were released on Thursday reporting a tally of 1,724,935 units, down 4.003% from 1,797,432 units sold in April 2022. OBD 2A norms have led to vehicle price increases which saw purchases advanced to March.
Two-wheeler sales were down 7.30% and the struggle for revival continues. All in all, 1,229,911 were sold, compared to 1,326,773 units in April 2022. FADA has urged the GST Council to consider a rate reduction from 28% to 18% for two-wheelers where the entry-level category is seeing fewer buyers.
“The rural economy has yet to show significant progress. Compared to the pre-COVID April 2019, 2-wheeler sales are still down by 19%,” said Singhania. The good news is that the marriage season in May could bring about a sales resurgence.
Additionally, as electric vehicles gain popularity, customers are considering transitioning from the internal combustion engine space which may temporarily delay purchasing decisions.
It was also for the first time in eight months that passenger vehicles saw de-growth with 282,674 units, against 286,539 units sold in April 2022, a fall of 1.35%.
Singhania said the PV segment, which achieved record sales in FY23, slowed down in April, with retails decreasing by 1%. “This was primarily due to last year's high base and the OBD 2A norms, which led to vehicle price increases and advanced purchases in March,” he added.
Although supplies are improving, there is “significant mismatch between customer demand and available inventory”. Furthermore, entry-level PVs have fewer buyers, suggesting that customers at the bottom of the pyramid are still hesitant to upgrade from 2-wheelers to 4-wheelers. Alternatively, it could also mean that levels of disposable incomes are still low.
The three-wheeler segment, however, grew 57.22% with 70,928 units, up from 45,114 units in the same month last year. According to FADA, the e-rickshaw category (P) saw sales of 31,653 units, against 18,522 units sold in April 2022, a growth of 70.89%. The e-rickshaw with cart (G) category grew 69.58% YoY.
“Thanks to high demand in the e-rickshaw and passenger segments, the 3-wheeler segment has grown by 57% YoY and also surpassed pre-COVID levels at a healthy rate,” explained Singhania.
April also saw the tractor and CV segments grow by a modest 1% and 2%. Against 55,019 tractors retailed in April 2022, the tally for this year was 55,835 units, up 1.48%. Similarly, against 83,987 CVs sold last year, the corresponding number this year was 85,587 units, an increase of just 1.91%. According to Singhania, dealers reported that vehicle availability was a major concern due to the OBD 2A norms.
Unfavourable weather conditions persist in May, including untimely rains and hailstorms, causing crop damage in multiple states. This has increased concerns for farmers and may potentially impact entry-level 2-wheeler and passenger car sales.
Considering these factors, FADA said it was maintaining a cautious stance for May. Further, in the PV segment, rising inventory levels are raising concerns. FADA has urged OEMs to recalibrate their inventory and prioritise production and supply of products in high demand. This will ensure more efficient alignment between market demand and available inventory.
Eventually, this will ultimately benefit both customers and manufacturers. Despite the ongoing chip shortages and somewhat sluggish market conditions, the marriage season in May is expected to provide a slight boost in sales.
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