Auto Retail Sector Faces Short-Term Setback In June 2023 Fespite YoY Growth, Reports FADA


The Federation of Automobile Dealers Associations (FADA) has released the Vehicle Retail Data for June 2023, revealing a mixed performance in the auto retail sector. While there was a 10% year-on-year (YoY) growth, there was an 8% month-on-month (MoM) dip, indicating a short-term deceleration in sales.

Analyzing the individual categories on a YoY basis, the 2W (two-wheeler), 3W (three-wheeler), PV (passenger vehicle), Tractor, and CV (commercial vehicle) segments observed growth rates of 7%, 75%, 5%, 41%, and 0.5% respectively. Compared to pre-COVID levels, the overall auto retail marked a marginal decrease of 3%, with the 2W segment being the only laggard. However, the CV segment experienced a notable 1.5% growth compared to June 2019, surpassing the pre-COVID levels for the first time.

Despite some short-term contraction, the growth narrative of the Indian automotive industry remains resilient. In June 2023, the 3W, PV, and Tractor segments achieved all-time highs compared to previous June figures. However, the 2W sector faced supply constraints from certain OEMs, softer demand due to economic conditions, and higher entry-level bike costs. New model introductions, festive promotions, and seasonal factors were unable to significantly boost sales, resulting in a 12% MoM drop in two-wheeler sales.

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Electric vehicle (EV) sales witnessed a substantial 56% MoM decline, primarily due to the government’s reduction of FAME (Faster Adoption and Manufacturing of Electric Vehicles) subsidies, leading to extreme price hikes. Despite this, the 3W market exhibited a robust growth in June 2023, driven by the low base effect from the previous year and positive market sentiment. The shift towards alternative fuels, especially EVs, continues to play a significant role in driving this growth, despite potential supply concerns due to the non-availability of OBD2 (On-Board Diagnostics 2) vehicles.

The PV segment faced a mixed landscape characterized by variable demand, dynamic product portfolios, and oscillating market sentiments. FADA commended Maruti’s swift action in facilitating the clearance of slow-moving model stockpiles by underwriting dealer interest costs, which contributed positively to the segment. While dealers noted sporadic supplies of popular models and aging product concerns for slow-moving variants, the segment experienced an uptick in demand for new models and anticipated further rural sales growth.

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The CV segment encountered mixed dynamics influenced by inconsistent demand, supply issues, government policies, and external market factors. The government’s push for infrastructure development and growth in coal mining spurred demand for heavy commercial vehicles. However, high-interest rates and rising prices presented challenges to the segment.

Looking ahead, the near-term outlook for the auto retail sector signals mixed trends. The two-wheeler market anticipates continued supply challenges and economic pressures, while the reduction in FAME subsidies casts a shadow over EV sales. Conversely, the three-wheeler market predicts growth, driven by favorable market responses and rising demand. The passenger vehicle segment faces a dichotomy of factors, with optimism stemming from the launch of new models and potential rural sales growth, despite inventory pressures from OEMs. The commercial vehicle sector contends with positive market sentiment and potential monsoon impacts, with demand driven by infrastructural projects and improved financing options.

The agricultural sector, on the other hand, faces uncertainties due to erratic monsoon rainfall hindering crop sowing. The delayed and uneven rains may impact crop yields, shorten crop cycles, and cause delays in future crop arrivals. These developments could affect automobile sales, particularly in rural areas, where a weak agricultural season could reduce disposable income and consequently affect the demand for two-wheelers and entry-level cars. However, upcoming rains may potentially boost agricultural prospects, revive rural demand, and positively influence automotive sales. FADA remains cautiously optimistic about the near-term outlook.

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