Overall Auto Sales Decline By 4 Per Cent In April 2023: FADA

The Federation of Automobile Dealers Associations (FADA) released vehicle retail data for April 2023, registering a 4 per cent compared to April 2022. Although the 3-wheeler segment enjoyed robust growth of 57 per cent in the same month last year, the tractor and CV segments only grew by a modest 1 per cent and 2 cent, respectively. Meanwhile, the two-wheeler and passenger vehicle categories experienced degrowth of 7 per cent and 1 per cent, respectively.

According to FADA, the two-wheeler segment's continued low sales can be attributed to limited supplies due to the OBD 2A shift, untimely rains, and pre-buying in March, while model mix availability, rural sentiment, and demand in the motorcycle segment remain weak. The rural economy has yet to show significant progress, and compared to pre-COVID April 2019, two-wheeler sales are still down by 19 per cent.

Similarly, sales in the PV segment slowed down in April 2023, with retail sales decreasing by 1 per cent from April 2022. This was primarily due to last year's high base and the OBD 2A norms, which led to vehicle price increases and advanced purchases in March. As a matter of fact, this is the first time in eight months that the PV segment has witnessed a YoY degrowth, potentially signaling a tapering of demand in this segment.

FADA says, “Although supplies are improving, there is a significant mismatch between customer demand and available inventory." Furthermore, entry-level PVs have fewer buyers, suggesting that customers at the bottom of the pyramid are still hesitant to upgrade from 2-wheelers to 4-wheelers.

Looking at the future, FADA feels that the two-wheeler segment will continue to face challenges, with entry-level vehicles attracting fewer buyers. For this reason, FADA urges the GST Council to consider reducing GST on 2-wheelers from 28 per cent to 18 per cent to help revive this vital segment, which represents 75 per cent of total auto sales volume.

On the other hand, the upcoming marriage season in May is expected to bring about a sales resurgence, driven by an increase in customer inquiries. Additionally, as electric vehicles (EVs) gain popularity, customers are increasingly considering transitioning from internal combustion engines (ICE) to EVs, which may temporarily delay purchasing decisions.

In the PV segment, rising inventory levels are raising concerns, and for this reason, FADA urges OEMs to recalibrate their inventory and prioritise the production and supply of products that are in high demand, ensuring a more efficient alignment between market demand and available inventory.

The statement added, “This will ultimately benefit both customers and manufacturers. Despite the ongoing chip shortages and somewhat sluggish market conditions, the marriage season in May is expected to provide a slight boost in sales for the current month.”

The report also stated that unfavorable weather conditions persist in May, including untimely rains and hailstorms, causing crop damage in multiple states. This exacerbates concerns for farmers and may potentially impact entry-level 2-wheeler and passenger car sales.