Automobile retail sales in the country saw a solid 10 per cent growth overall across categories in FY24, with some sections like bikes and scooters revving ahead amid increased electric adoption. Growth in passenger cars and SUVs were a comfortable 8.45 per cent while two-wheelers saw eye-popping growth of nearly 50 per cent.
Then why is India’s sector bracing for challenges in the coming days?
It is much more than the ongoing election season, which is anyway a damp period for business activity. However, this time around, there are a few more worry factors compounding the whole scenario. With the Centre for Monitoring Indian Economy (CMIE) reporting a notable decline in consumer sentiment among urban Indians, the industry feels it will face a nuanced challenge.
“The downturn, characterised by a restraint in discretionary spending within urban income brackets adds a layer of complexity to the landscape,” said Manish Raj Singhania, president of the Federation of Automobile Dealers Association (FADA), which came out with the retail sales data on Monday morning. “In this scenario, the decision of the MPC of the RBI to keep lending rates unchanged at 6.5 per cent would continue to badly impact the retail sales of all vehicles, especially entry level vehicles as these buyers are extremely price sensitive. Given the continued inflationary trend without any relief in finance rates, these prospective buyers may continue to hesitate.”
Indian auto’s best-case scenario is that these clouds will blow over by June-July, when good rains, coupled with a new government taking charge, will act as a boost. (New government’s) favourable policies and an anticipated good monsoon are expected to fuel demand, especially in rural areas and the commercial vehicle sector, which is closely linked to infrastructure projects and economic activity, according to FADA.
The optimism stems from how the industry negotiated headwinds through financial year 2024, despite threats of a looming recession and rural slowdown visible since the pandemic. However, on the home run, it managed a commendable double-digit growth, with three-wheelers, personal vehicles (PV) and tractor segments setting new record highs, surpassing previous years’ performances.
While the strong demand for SUV vehicles spurred the four-wheeler PV segment, electric adoption was a visible driver in the two-wheeler space, especially as the March 31 deadline for expiry of Fame-2 subsidies approached. While the lack of subsidies may impact electric vehicle sales in the first couple of months of the new financial year, it is expected that the government will come up with an alternative offer pretty soon.
