The Federation of Automobile Dealers Associations (FADA) has released the vehicle retail data for July 2024, revealing significant trends and insights across various segments of the Indian automotive market.
Overall Growth:
The Indian auto retail sector demonstrated robust growth, achieving a 13.84% year-on-year (YoY) increase in July 2024. This growth was driven by positive performances across most vehicle categories, with the exception of tractors. The total vehicle retail for July 2024 stood at 2,034,116 units, up from 1,786,779 units in July 2023.
Segment Performance:
- Two-Wheelers (2W): This segment saw a remarkable YoY growth of 17.17%, with 1,443,463 units sold in July 2024 compared to 1,231,930 units in July 2023. The positive impact of a thriving rural economy, favorable monsoon effects, and government support programs significantly contributed to this growth.
- Three-Wheelers (3W): Sales increased by 12.88% YoY, with 110,497 units sold in July 2024, up from 97,891 units in July 2023. The growth in this segment was supported by increased demand for electric rickshaws and goods carriers.
- Passenger Vehicles (PV): This segment registered a 10.18% YoY growth, with sales rising to 320,129 units in July 2024 from 290,564 units in July 2023. The introduction of new models and attractive pricing strategies played a crucial role in driving sales.
- Commercial Vehicles (CV): The CV segment experienced a moderate 5.93% YoY growth, with 80,057 units sold in July 2024 compared to 75,573 units in July 2023. The growth was driven by increased activity in the construction and mining sectors.
- Tractors (Trac): This segment saw a significant decline of 11.95% YoY, with 79,970 units sold in July 2024, down from 90,821 units in July 2023. Poor sowing activity in the previous year due to El Nino disruptions impacted the sales in this segment.
Challenges Identified:
- Monsoon Impact: While July 2024 saw above-normal cumulative rainfall, its uneven geographical distribution resulted in varying impacts across different regions. Southern and Central India received excess rain, whereas 10 meteorological divisions faced a double-digit deficit.
- Consumer Sentiment: Heavy rains and economic uncertainties dampened consumer sentiment in some regions, affecting sales.
- High Inventory Levels: The PV segment faced an inventory surge to historic highs of 67-72 days, equating to Rs 73,000 crores worth of stock. This poses a significant risk to dealer sustainability.
- Financial Strain: Dealers continued to face financial pressure due to high inventory and interest costs.
- Market Competition: Intense competition and heavy discounting in the PV segment also posed challenges.
Near-Term Outlook:
FADA remains cautiously optimistic for the near-term outlook across the auto retail segments. The Indian Meteorological Department (IMD) predicts ‘above normal’ rainfall for the second half of the monsoon season, which is expected to support Kharif sowing and standing crops. The festive season is also anticipated to boost auto retail sales across segments.
Dealer Sentiment:
Dealers have a cautiously optimistic outlook with anticipated new product launches. However, concerns over low customer inquiries and potential impacts of heavy rains persist.
Key Findings from Online Members Survey:
- Liquidity: Neutral (50.22%), Good (25.97%), Bad (23.81%)
- Sentiment: Neutral (45.89%), Good (29.87%), Bad (24.24%)
- Expectation for August 2024: Growth (51.08%), Bad (38.10%), De-growth (10.82%)
Conclusion:
Despite challenges such as heavy rainfall, high inventory levels, and economic uncertainties, the Indian auto retail sector showed significant growth in July 2024. Effective inventory management and stringent financial checks are essential to sustain growth and mitigate financial risks, ensuring the stability and health of the auto retail sector.
