Elections and summer heat dampen Indian auto sales in May 2024: FADA

The Indian automotive retail sector witnessed a mixed performance in May 2024, according to the Federation of Automobile Dealers Association of India (FADA). While the overall sector grew by 2.61 per cent year-on-year (Y-o-Y), it experienced a 5.28 per cent decline in sales compared to the previous month (M-o-M). FADA attributed this drop to the extreme weather conditions and the impact of elections across the country.

In the retail data released by FADA on Monday, the two-wheeler (2W) segment saw a 2.5 per cent Y-o-Y rise, and three-wheeler (3W) sales increased by an impressive 20 per cent Y-o-Y. However, passenger vehicles (PV) experienced a 1 per cent Y-o-Y decline, tractors (Trac) de-grew by 1 per cent Y-o-Y, and commercial vehicles (CV) experienced a 4 per cent YoY growth.

FADA stated that the extreme heat and elections significantly impacted footfall, with showrooms witnessing an 18 per cent drop in walk-ins. The elections and related uncertainties affected customer sentiment, leading to delays in purchasing decisions.

Despite the challenges, FADA noted that positive rural demand, fueled by the expected good monsoon and improved finance availability, kept the counters ticking. Additionally, good movement in market loads, cement, iron ore, and coal sectors contributed positively, despite supply constraints and a lack of OEM marketing activities.

Manish Raj Singhania, the FADA president, provided insights into the performance of various segments. He said, “In May 2024, the Indian Auto Retail sector achieved a modest 2.61 per cent YoY growth. The two-wheeler (2W), three-wheeler (3W), and commercial vehicle (CV) segments grew by 2.5 per cent, 20 per cent, and 4 per cent, respectively, while passenger vehicle (PV) and tractor (Trac) were in the red by 1 per cent each YoY.”

Singhania further elaborated on the two-wheeler segment, stating, “The two-wheeler segment grew by 2.5 per cent YoY but declined by 6.6 per cent M-o-M. Dealers reported supply constraints, lack of OEM marketing activities, and impacts from extremely hot weather and elections. Positive rural demand due to expected good monsoon and improved finance availability were also noted, which kept the counters ticking.”

Looking ahead, the industry remains cautiously optimistic. Post-election stability and continuity in the government are expected to boost infrastructure projects and economic activities. Above-normal rains forecasted by the India Meteorological Department (IMD) should enhance rural demand and support economic activities. However, addressing extreme weather challenges, intense competition, and liquidity issues will be crucial for sustained market improvement.

Singhania provided further insights into the PV and CV segments. “The PV segment showed -1 per cent Y-o-Y and a -9.5 per cent M-o-M decline. Dealers cited the impact of elections, extreme heat, and market liquidity issues as major factors. Despite better supply, some pending bookings, and discount schemes, the lack of new models, intense competition, and poor marketing efforts by OEMs affected sales. Additionally, increased customer postponements and low enquiries further contributed to the challenging market conditions. Due to the extreme heat, the number of walk-ins to showrooms dropped by around 18 per cent.”

“The CV segment showed a 4% YoY growth but an -8 per cent M-o-M decline. Dealers reported that elections and extreme climatic conditions heavily impacted sales. Despite growth due to a low base from last year and increased bus orders, the industry faced challenges from wholesale pressures, government policy effects, and negative market sentiment. Additionally, good movement in market loads, cement, iron ore, and coal sectors contributed positively,” Singhania added.