13% on-year growth in Feb auto sales; passenger vehicle retail up 12%: FADA

February auto sales: February recorded an on-year growth of 13 per cent in auto retail, with a growth across all categories. Two-wheeler sales grew 13 per cent, while three-wheeler sales grew 24 per cent, tractor sales grew 11 per cent and commercial vehicle sales grew 5 per cent. Passenger vehicles sales saw a growth of 12 per cent, as per data by Federation of Automobile Dealers Associations (FADA).

According to FADA President, Manish Raj Singhania, the PV segment exhibited an impressive growth of 12 per cent on the back of new products and enhanced vehicle availability. This has been the highest sales figure for PVs in the month of February. 

Singhania said that while the customer sentiment and introduction of new models have resulted in high demand, the high inventory levels at 50-55 days present a significant concern. Hesaid that it is imperative for PV OEMs to make adjustments to mitigate these high inventory levels, thereby reducing the financial burden of carrying costs on dealers. 

The 2W segment’s growth was driven by the rural sector, premium model demand and strong entry-level segment performance, the FADA President said. “Factors like favourable marriage dates and improved economic conditions also contributed to this positive growth,” he said. 

EVs made up 53 per cent of the growth of the 3W market that surged by 24 per cent on-year. This indicates a shift towards electric e-rickshaws, along with better market sentiment and consumer engagement.

“The CV segment grew by 5 per cent YoY, overcoming challenges through fleet purchases and school buses, strong sectoral demand and improved financing, despite obstacles like cash flow shortages and election-related purchase deferrals, highlighting the sector's resilience and gradual recovery,” said Singhania. 

FADA stated that the auto retail sector is influenced by a blend of positive trends and challenges in the near term outlook. Rural sector’s robust signals, along with demand for premium and entry-level segments are set to bolster the 2W market, while 3W and CV sectors will be driven by the financial year-end rush and infusion of funds into the market. Year-end buying incentives, improved availability of vehicles, seasonal factors like marriages are set to propel the demand for the PV sector.

“However, the anticipation of elections casts a shadow over this positive scenario, with potential deferred purchases across segments. The commercial vehicle sector, in particular, might face a cautious approach from customers waiting for the outcome of general elections. Supply constraints further complicate the landscape, especially in the PV segment, where the availability of popular variants remain a concern,” FADA stated. 

External factors like crop failures could dampen market sentiment and financial liquidity, the federation said. 

“Overall, the near-term outlook for March 2024 in the auto retail sector is one of cautious optimism. Financial year-end activities traditionally spur purchasing across segments, yet the feedback from dealers highlights the nuanced challenges of inventory management, extremely aggressive target settings and evolving consumer preferences. OEMs' ability to address these challenges through strategic product introductions, supportive dealer policies and adaptive sales strategies will be paramount in maintaining the sector's growth momentum and achieving success in the near term,” FADA stated.