The Federation of Automobile Dealers Associations (FADA) has released the vehicle retail data for May 2024, revealing a modest year-on-year growth of 2.61% for the Indian auto retail sector. The growth is accompanied by varied performance across different vehicle segments highlighting the complex market conditions currently affecting the industry.
The two-wheeler (2W) segment saw a slight year-on-year increase of 2.5%, but a month-on-month decline of 6.6%. This decrease was attributed to supply constraints, lack of marketing initiatives from original equipment manufacturers (OEMs) and extreme weather conditions. The three-wheeler (3W) segment performed notably better with a 20% year-on-year growth driven by strong demand in both passenger and goods categories.
Passenger vehicle (PV) segment faced a 1% year-on-year decline and a significant 9.5% drop compared to April 2024. The decline in this segment was mainly due to the lack of new model launches, election season, extreme heat and market liquidity issues, which dampened consumer sentiment and reduced showroom footfall by 18%. The tractor (Trac) segment also experienced a 1% year-on-year decline, despite a month-on-month increase in sales.
Commercial vehicles (CVs) saw a 4% year-on-year growth but faced an 8% decline from the previous month. This segment benefited from increased demand in key industries such as cement, iron ore, and coal, despite broader market challenges.
Positive rural demand driven by expectations of a good monsoon and improved finance availability helped sustain sales in certain segments. However, the election season introduced uncertainties that delayed purchasing decisions and negatively impacted consumer sentiment. Extreme heat waves further complicated the market landscape, contributing to a significant reduction in showroom visits.
Despite challenges the industry remains cautiously optimistic. Post-election stability and the continuation of government infrastructure projects are anticipated to boost economic activities and market sentiment. The India Meteorological Department's forecast of above-normal rains could enhance rural demand, supporting economic activities in rural areas. Managing liquidity and inventory levels will be crucial to maintaining profitability for dealerships.
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