Passenger vehicle sales faced a downturn in March: FADA

Passenger cars faced a downturn in March 2023 as retail sales declined 6% year-on-year last month, according to the Federation of Automobile Dealers Associations (FADA).

The passenger vehicles sector encountered challenges led by heavy discounting and selective financing, the auto dealers' lobby says. "Nonetheless, positives such as improved vehicle availability, increased stock levels and new model launches did stimulate demand in certain areas. The impact of election activities and changes in festival dates also played a role in sales dynamics," it says.

The auto sector experienced a modest growth of 3.14%. The two-wheeler (2W) and three-wheeler (3W) segments saw increases of 5% and 17% respectively, while passenger vehicles (PV), tractors and commercial vehicles (CV) faced declines of 6%, 3%, and 6% respectively.

"The 2W segment demonstrated resilience and adaptability, with electric vehicle (EV) sales surging due to the expiration of the FAME 2 subsidy on March 31. This led to a notable boost in the 2W-EV market share to 9.12%," says FADA president Manish Raj Singhania.

“Positive market sentiment was supported by seasonal events, improved vehicle supply, and financial incentives. Despite facing market volatility and intense competition, the industry is strategically evolving, particularly in the premium and EV categories, signalling a bright future,” Singhania says.

For the CV sector, March presented a complex scenario. The election announcement resulted in a temporary reduction in purchases, though there is an expectation of a recovery post-election, with decreasing concerns about the forthcoming monsoon, says the FADA president. “The sector grappled with issues like recent declines, poor agricultural outcomes, discount pressures and financing difficulties. On the upside, there was strong demand in specific areas such as coal and cement transportation, bolstered by bulk orders and vehicle upgrades, which enhanced customer engagement,” he says.

The three-wheeler segment showed an encouraging sales trend hitting an all-time high retail, driven by the growing acceptance of EVs. The introduction of EV autos and loaders positively impacted the retail environment, says Singhania.

With a notable decline in consumer sentiment among urban Indians, as reported by the Centre for Monitoring Indian Economy (CMIE), the automotive sector faces a nuanced challenge, says the dealers’ lobby.

This downturn, characterised by a restraint in discretionary spending within urban income brackets, adds a layer of complexity to the industry's landscape, it says. “In this scenario, the decision of the MPC of the RBI to keep lending rates unchanged at 6.5% would continue to badly impact the retail sales of all vehicles, especially entry level vehicles as these buyers are extremely price sensitive,” says FADA.

"Given the continued inflationary trend without any relief in finance rates, these prospective buyers may continue to hesitate. Coupled with the forthcoming elections, these challenges will influence the industry, potentially curbing vehicle sales across all segments," it warns.