Navigating Auto Sales Declines
According to auto body FADA, auto retail sales in May dropped by 5.28% compared to the previous month, primarily due to a heatwave, a lack of new models, and the recently concluded Lok Sabha elections. However, sales saw a 2.6% increase compared to the same month last year. Two-wheelers and commercial vehicles experienced year-on-year growth, whereas passenger vehicles and tractors saw marginal declines.
On a monthly basis, twowheelers, passenger vehicles, and commercial vehicles retail saw declines of 6.6%, 9.5% and 8%, respectively. Despite the poor performance of other categories, 3Ws and tractors managed to grow 22.7% and 23.7% each.
On a yearly basis, sales of two-wheelers increased 2.5% while three-wheelers rose 20%. The passenger vehicles and tractor segment both saw a contraction of 1% each, while commercial vehicles grew 4%.
What’s In It for Investors?
According to government data, India's auto industry contributes 7% to the country's GDP. Additionally, auto sales serve as a significant indicator of private consumption in the world's fifth-largest economy. Despite reports of lacklustre auto sales, investors remained reassured by the positive sentiment in the sector, buoyed by promising forecasts of an above-average monsoon and a stable government assuming leadership.
FADA expects to see some stability in the near term with the elections over, even as it remains wary of extreme weather conditions and the reopening of schools in July affecting purchasers' decision-making. Manufacturers are addressing sales declines with strategies like launching new models, expanding distribution networks, and targeting export markets. However, FADA highlights persistent challenges including intense competition, delays in new model launches, and ineffective marketing efforts by OEMs. Dealerships continue to face liquidity issues and high inventory levels, although discount schemes and product availability are favourable. Low customer inquiries and seasonal postponements remain pressing concerns.