Federation of Automobile Dealers Associations (FADA) reported a 9.1% year-on-year growth in vehicle retail during CY24, demonstrating the automotive market’s resilience amidst economic and environmental challenges. This growth was led by significant performances in the two-wheeler (10.7%), three-wheeler (10.4%), passenger vehicle (5.1%), and tractor (2.5%) segments, while the commercial vehicle sector remained stagnant at 0.07%. Despite these gains, sector-specific issues reflect underlying vulnerabilities in the market.
The two-wheeler market’s near recovery to its CY18 peak highlights a resurgence in rural demand, driven by improved supply and fresh model introductions. However, rising competition from electric vehicles and financing challenges remain hurdles. Similarly, the passenger vehicle segment benefited from network expansion and product launches, but rising inventory and discounting pressures constrained margins. Commercial vehicles, meanwhile, struggled with election-driven uncertainties and lower infrastructure spending.
December 2024 Registers Decline In Retail Numbers
Contrary to CY24’s overall growth, December 2024 recorded a sharp 12.4% year-on-year decline in retail sales, with all segments except tractors witnessing a drop. Two-wheelers led this decline at -17.6%, followed by commercial vehicles (-5.2%), passenger vehicles (-1.9%), and three-wheelers (-4.5%). Tractors, in contrast, posted a notable 25.7% growth aided by a strong agricultural season.
The two-wheeler decline reflected poor cash flow, delayed crop payments, and intensified EV competition. Similarly, passenger vehicles faced high post-festive inventory and deferred purchases as customers awaited potential New Year benefits. Commercial vehicle sales were hit by weak sentiment, government funding delays, and slow financing approvals.
Regional & Seasonal Trends Impacting Market Dynamics
Regional disparities in sales underscore the importance of rural markets in sustaining vehicle demand. Rural regions exhibited more pronounced declines, particularly in two-wheelers (-20.4%) and commercial vehicles (-7.7%). However, tractors showed strong rural gains, reflecting an agricultural rebound.
The seasonality of sales was evident in December, with the post-festive lull exacerbated by high inventory and limited new launches. Dealers’ reliance on aggressive discounting to clear stock further impacted profitability, hinting at a structural issue in inventory management.
Challenges For 2025
Looking ahead 48.09% of dealers expecting growth in January 2025. The two-wheeler market is poised for a rural recovery driven by improved minimum support prices and liquidity, although financing remains a challenge. Commercial vehicles may see a modest uptick, contingent on infrastructure projects and smoother credit access. Passenger vehicles are expected to benefit from new launches and wedding-season demand, though potential price hikes may temper this growth.
The longer-term outlook for CY25 appears promising, with 66.41% of dealers anticipating growth. Factors such as rural income growth, government policy support, and a wave of new launches across segments, including electric vehicles, are expected to drive momentum. However, risks such as financing bottlenecks, price sensitivity, and evolving EV competition remain key concerns.
Dealers and manufacturers must address structural inefficiencies, balance inventory management, and navigate the shifting landscape of EV adoption and consumer preferences.
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