Indians bought fewer cars and two-wheelers in July, FADA pins hope on festive season

India’s retail vehicle sales saw a five percent dip in July compared to the last month with severe monsoons and flood like situations especially in North India, impacting sales, the Federation of Automobile Dealers Associations of India (FADA) said as it released monthly auto sales data on August 7.

The only exception was the three-wheeler segment, which grew by nine percent. “July was particularly commendable for the 3W category, which registered an all-time high sale of 94,148 units, translating to a 74 percent YoY and 9 percent MoM growth,” FADA said in a statement.

On the other hand, categories like two wheelers, passenger vehicles and tractors registered reductions of six percent, four percent and eight percent, respectively. Commercial vehicle retail sales closed flat at -0.2 percent, shows FADA data.

However, on a year-on-year basis, July sales maintained a steady 10 percent growth. All vehicle categories recorded positive figures with two-wheelers recording eight percent growth, three-wheelers at 74 percent, passenger vehicles at four percent, tractors at 21 percent, and commercial vehicles (CV) at two percent. Compared to pre-COVID figures, auto retail decreased by 13 percent, according to FADA data.

“Despite challenges like heavy monsoons and a tilt towards EVs due to high fuel prices, 2W showed resilience in July '23, with increased demand and trust in reputable brands. The 3W segment's record numbers indicate industry potential and a growing EV interest. Yet, addressing issues like OEM support and dealer engagement remains crucial,” FADA president Manish Singhania said.

Reflecting on the trend during the month, he said, SUVs continued to remain a popular choice while the CV segment showed mixed dynamics. Despite robust stock availability and growth in areas like school buses, challenges from erratic weather and high vehicle costs affected demand. However, infrastructure project boosts remain a silver lining, he said.

For August, he said, the auto industry is marked by a blend of opportunities and challenges, the auto dealers' association said.

“The 2W sector expects an uptick, driven by upcoming festivals, a harmonious supply-demand equilibrium and the rollout of new models. The 3W category, too, is witnessing a surge in interest, particularly towards electric variants. In the realm of CV, the anticipation of the festive season, the aftermath of a good monsoon and pent-up demand set the stage for potential growth,” the FADA president said.

He added that the PV segment also is likely to benefit from festive euphoria and new product introductions coupled with high demand in the SUV category.

“However, challenges loom on the horizon. The 2W segment's entry-level category continues to be a cause for concern. In the CV space, there are apprehensions regarding streamlined loan disbursements for buyers. Inventory level in PV has breached 50 days mark in anticipation of upcoming festival season and the slowdown in entry level car remains,” Singhania pointed out.

According to him, a larger concern is the IMD's projection of a below-average rainfall in August, potentially leading to lower crop yields. This could impact the purchasing power, especially in rural regions, thereby impacting sales, he highlighted.