Auto sales stay flat at 18.95 lakh in June, passenger car retail melts in heatwave, polls: FADA

Automobile retails remained flat in June 2024 with a minuscule increase of 0.73 percent to 18,95,552 units from the year-ago period because of subdued sales in passenger vehicles (PVs), two and three-wheelers, and tractors, data released by the Federation of Automobile Dealers Associations (FADA) on July 5 showed. The total vehicle sales in June 2023 stood at 18,81,883 units.

According to FADA President Manish Raj Singhania, June is traditionally one of the "weakest months" for India’s auto retail and this year, while the monsoon progressed normally up to Maharashtra, it lost momentum, delaying rains in West Bengal, Bihar, Uttar Pradesh, Chhattisgarh, and Madhya Pradesh.

“This exacerbated the effects of a severe heatwave in northwest India, contributing to a prolonged hiatus that not only intensified the heatwave but also delayed the sowing operations of kharif (summer sown) crops in northern and north-western regions, thereby impacting rural sales,” he said.

PV retail skids into the red

Despite PV wholesales going up by 3.67 percent to 3.40 lakh units,  retail offtake went down by 6.77 percent in June at 2,81,566 units vis-à- vis 3,02,000 units a year ago, shows the FADA data. On a month-on-month basis, retail sales dropped 7.18 percent from 303,358 units in May 2024.

The auto retail body had stated that soaring temperature levels and multiple phases of elections dissuaded consumers from visiting the showrooms last month. The FADA president had flagged his concern about the rising inventory levels of cars, which have reached an all-time high – ranging from 62 to 67 days.

“Despite improved product availability and substantial discounts aimed at stimulating demand, market sentiment remains subdued due to extreme heat resulting in 15 percent less walk-ins and delayed monsoons. Dealer feedback highlights challenges such as low customer inquiries and postponed purchase decisions,” Singhania said.

He also said that passenger vehicle original equipment manufacturers OEMs) to exercise caution as the festive season is still some time away.

"With the festive season still some time away, effective inventory management strategies are essential to mitigate financial strain from high interest costs. FADA strongly urges passenger vehicle original equipment manufacturers to implement prudent inventory control and engage proactively with the market," reasoned Singhania.

FADA also revealed that two-wheeler registrations gained 5 percent year-on-year to 13,75,889 units in June. Factors such as extreme heat resulted in 13 percent fewer walk-ins by probable customers in showrooms, as per FADA.

The FADA president revealed that stalled monsoon and election-related market slowdowns particularly affected rural sales, which fell from 59.8 percent in May to 58.6 percent in June.

Commercial vehicle sales dropped 5 percent to 72,747 units last month, from 76,364 units in June 2023.

"The industry continues to face de-growth, impacted by high temperatures affecting the agricultural sector and infrastructural project slowdowns," Singhania said.

Three-wheeler registrations rose 5 percent to 94,321 units in June, as compared to 89,743 units in the year-ago month. Tractor sales last month declined 28 percent year-on-year to 71,029 units in June.

Business outlook

FADA believes that the newly elected government’s increase in minimum support prices (MSPs) for kharif crops is expected to improve disposable incomes in rural India, potentially enhancing auto retail performance.  However, dealer feedback across the two-wheeler, passenger vehicle and commercial vehicle segments presents a "cautious picture".

"While dealers anticipate better sales due to improved supply and new product launches, they express concerns over low customer inquiries and market sentiment dampened by heavy rains," he said.

The industry body also stated that in the PV segment, high inventory levels and ongoing low market sentiment necessitate "cautious management". In the two-wheeler segment, the arrival of the monsoon is expected to provide a boost, although challenges such as “agricultural cash flow constraints” and “regional market variations” remain.

The CV sector looks forward to potential growth driven by renewed infrastructure projects and seasonal demands, despite current slowdowns, it said.

“Based on current market conditions, the overall rating for July auto retail performance is cautiously optimistic with a moderate outlook. While some segments may see improved activity, overall growth is likely to be tempered by persistent challenges,” Singhania said.