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, the Federation of Federation of Automobile Dealers Associations (FADA), said.
FADA President, Manish Raj Singhania, said, “February 2023 continued to witness double digit growth of 16% YoY but was still down by 8%, when compared to pre-covid month of February 2020. All categories also witnessed double digit growth.”
The 2-Wheeler category witnessed a growth of 15% YoY but was down by 14% when compared to pre-covid month of February 2020. 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.
However, the 3-wheeler segment which grew by 81%, for the first-time breached pre-pandemic level of February 2020 by growing by 3.3%. This category has seen a drastic growth due to Central and State Government’s subsidy along with good scheme promotion done by the states. Along with this, aggressive finance schemes continued to aid growth for this category, FADA said in a media release on Monday.
Passenger vehicle category continued its growth despite the rural market which is yet to see full recovery. The segment saw a growth of 11% YoY and 16% when compared to pre-covid month of February 2020. Launch of new models, the 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 release said.
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.
“The Commercial Vehicle category has also shown robust growth by growing 17% Y-o-Y though it fell by 10% when compared to pre-covid month of February 2020. Walk-in enquiries improved during the month. Apart from this, demand has also increased due to change in OBD norms which will see price hikes. On the Government’s side, infrastructure spending has been healthy. This is also aiding better sales,” Singhania said.
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.