Auto Retail Outlook Shows Mixed Trends in July, Two-Wheeler Market Thrives Despite Challenges

Despite these positive developments, the auto industry remains cautious about the erratic monsoon season, which could potentially hinder crop sowing. 

Auto Retail Outlook Shows Mixed Trends in July, Two-Wheeler Market Thrives Despite Challenges

In the face of continued supply challenges and economic pressures, the auto retail industry in India is experiencing mixed trends in July, according to the Federation of Automobile Dealers Associations (FADA). The two-wheeler market, however, has managed to pick up momentum, defying the obstacles it faces.

One of the driving factors behind the growth in the two-wheeler segment is the upcoming rain and its potential impact on agricultural output. The rural areas, heavily dependent on agriculture, have witnessed an upward trend in two-wheeler sales. During the month, two-wheeler sales grew by approximately 7 percent year-on-year, reaching 1,310,186 units, compared to 1,227,149 units in June 2022.

Furthermore, the three-wheeler sales saw the highest growth, increasing by 75.48 percent year-on-year to 86,511 units in June, compared to 49,299 units in the same month last year. Tractor sales also recorded a substantial growth of 41 percent year-on-year, with 98,660 units sold during the month, compared to 69,952 units in June 2022.

Despite these positive developments, the auto industry remains cautious about the erratic monsoon season, which could potentially hinder crop sowing. A weak agricultural season could result in reduced disposable income in rural areas, impacting the demand for two-wheelers and entry-level cars, as stated by FADA.

Manish Raj Singhania, President of FADA, expressed cautious optimism for the near-term outlook, highlighting that upcoming rains may boost agricultural prospects, revive rural demand, and positively influence automotive sales.

On the other hand, the reduction in subsidies for hybrid and electric vehicles (EVs) under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme casts a shadow over EV sales. However, the three-wheeler market predicts growth due to favorable market responses and rising demand.

The passenger vehicle (PV) segment faces a dichotomy of factors. While the launch of new models and potential growth in rural sales provide optimism, dealers grapple with inventory pressures from original equipment manufacturers (OEMs) and demand-supply mismatches, impacting profitability, according to Singhania.

Despite these challenges, there is hope for a boost in sales during the upcoming festive season in late August. The commercial vehicle (CV) sector also faces a balancing act between positive market sentiment and potential monsoon impacts. Demand in this segment is driven by infrastructural projects and improved financing options, as highlighted by Singhania while sharing the monthly retail data of automobile sales in the domestic market.

FADA's monthly retail sales data reveals that PV sales grew by approximately 5 percent year-on-year to 295,299 units in June, compared to 281,811 units in the corresponding month last year. The CV retail sales saw a marginal increase of 0.44 percent, reaching 73,212 units last month, compared to 72,894 units in June 2022.

In total, all categories combined experienced a growth of 9.57 percent year-on-year, with 1,863,868 units sold in June, compared to 1,701,105 units in the corresponding month last year.