Passenger vehicle sales grow 12% in Feb

Retail sales of passenger vehicles grew 12% year-on-year to 3.3 lakh units in February compared with 2.93 lakh units in the same month last year, according to data released by the Federation of Automobile Dealers Associations of India (FADA).

Passenger cars marked the highest February sales figures ever, driven by new product introductions and enhanced vehicle availability, says the auto dealers' lobby.

FADA, however, says elevated inventory levels in the PV segment, remaining at 50-55 days, pose a significant concern, necessitating OEMs to adjust production to reduce dealer carrying costs.

“It is imperative for PV OEMs to undertake adjustments in production to mitigate these high inventory levels, thereby reducing the financial burden of carrying costs on dealers as it is vital for maintaining the financial health of dealers,” it says.

India’s auto retail sales experienced a robust 13% growth in February across all vehicle categories.

Two-wheeler market growth of 13% was driven by the rural sector, demand for premium models and strong performance of entry-level segments, says FADA.

“The 2W market's 13% YoY growth was driven by the rural sector, premium model demand, and strong entry-level segment performance, with broader product availability and compelling offers enhancing product acceptance. Factors like favourable marriage dates and improved economic conditions also contributed to this positive growth,” says FADA president Manish Raj Singhania.

The three-wheeler market surged by 24%, with electric vehicles making up 53% of this growth, fuelled by first-time users and a shift towards electric e-rickshaws, alongside better market sentiment and consumer engagement.

The commercial vehicle (CV) segment grew by 5%, 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, says Singhania.

In its near-term outlook, FADA says the rural sector's robust signals, along with an increased demand for premium and entry-level segments, are set to bolster the two-wheeler market. Similarly, both the 3W and CV sectors anticipate a boost in sales, driven by the financial year-end rush and an infusion of funds into the market, which is expected to stimulate purchases, it adds.

In the PV sector, the confluence of financial year-end buying incentives, improved availability of vehicles and seasonal factors such as marriages is likely to propel demand, the auto dealers’ body says.

FADA, 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, it cautions.

“Supply constraints further complicate the landscape, especially in the PV segment, where the availability of popular variants remain a concern. External factors like crop failures in rural areas could also dampen market sentiment and financial liquidity, posing additional hurdles to sustained growth,” it warns.

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, says FADA.