Auto Retail Sales In May Demonstrated A 10 Per Cent Overall Growth: FADA

The Federation of Automobile Dealers Associations (FADA), released the auto retail sales data for the month of May 2023. According to the report, auto retail sales in May 2023 demonstrated a 10 per cent YoY growth, encompassing positive performances across all vehicle categories, including 2W, 3W, PV, Tractor, and CV with respective growth rates of 9 per cent, 79 per cent, 4 per cent, 10 per cent and 7 per cent respectively.

Manish Raj Singhania, President, FADA said, “While there has been a slight 2 per cent decline compared to pre-COVID levels, the overall retail figures have shown improvement. The 2W and CV sales did continue to face some challenges, recording high single digit setback of 8 per cent and 7 per cent respectively.”

Moreover, the month of May 2023 showcased an increased penetration of EVs, accounting for 8 per cent of total sales, with 2W contributing 7 per cent, 3W contributing 56 per cent, CV contributing 0.5 per cent and PV contributing 2.5 per cent respectively. Additionally, the report revealed that the 2W sales were positively influenced by the marriage season and the anticipated changes in FAME subsidies, set to be effective from June, which drove higher sales of 2W EVs.

The PV segment rebounded after a decline in the previous month, driven by improved availability, strong pending orders, and robust demand for new launches, contributing to the segment's positive momentum. The CV sales experienced sustained growth, attributed to the government's focus on infrastructure development, with the bus segment also displaying a notable increase due to improved financing options and higher sales in academic institutions.

In the coming months, FADA states that the auto retail sector faces diverse challenges across the 2W, CV, and PV segments. For 2W, seasonal factors could boost demand, but concerns like weather-induced walk-in reductions, inventory, and regulatory norms persist.

Moreover, the CV sector anticipates improved vehicle availability but concerns about RDE norms and seasonal effects may impact sales. The PV sector expects increased demand, particularly for new models, Compact & full-sized SUVs and EVs, but inventory pressure and right model availability could pose challenges.

However, it is expected that EV two-wheeler volume sales will surpass 1.5 million units in FY24, following significant volume growth at 215 per cent in FY23. But the demand for EVs might experience a slowdown due to the reduction in the FAME II subsidy, which will decrease from the current 40 per cent to 15 per cent starting from June 1, 2023, resulting in increased ownership costs.

On the other hand, motorcycle sales are estimated to grow by 6-8 per cent, particularly in the premium segment, while scooters are expected to achieve a growth rate of 4-5 per cent in FY24.