Retail automobile sales grow 9% in August, dealers maintain cautious optimism for festive season

• In the two wheeler segment, positive growth was observed, but uncertain consumer sentiment impacted conversion rates and heightened competition among key players.
  
• In the passenger vehicle segment, persistent supply chain bottlenecks, particularly in meeting delivery deadlines, remain a concern.
  
• The onset of the festive season, starting with Onam, has boosted market sentiment, enhanced liquidity, and alleviated supply chain issues in all vehicle categories.
  

Ahead of the festive season, retail sales of automobiles in August grew by 9% year-on-year (Y-o-Y). While this growth was slightly lower than what was reported earlier, it was steady across various vehicle categories, shows data released in the August 2023 by the Federation of Automobile Dealers Association (FADA).

Two-wheelers (2W) sales grew by 6%, passenger vehicles (PV) saw a 6.5% rise, commercial vehicles (CV) went up by 3%. In what is a weakness in rural demand, there was an increase of 14% in sales of tractors. Sequentially, the industry registered a 3% growth in total auto sales, even as the tractor segment saw a 19% contraction.

2W market remains stable, while supply chain bottlenecks remain the in the PV segment

In the two-wheeler sector, the market displayed stability despite mixed conditions. Positive growth was observed, but uncertain consumer sentiment impacted conversion rates and heightened competition among key players.

In the passenger vehicle arena, increased vehicle supply and expanded customer incentives maintained positive market dynamics. However, persistent supply chain bottlenecks, particularly in meeting delivery deadlines, remain a concern. The market responded positively to new hybrid and CNG models, but a limited product range in popular segments, such as mid-size SUVs, has limited overall potential.

The commercial vehicle industry displayed a mixed scenario. Despite challenges such as slow freight transport, sectors like cement, iron ore, and coal saw strong demand. With the upcoming festive season, signs of a market recovery are becoming apparent. This resurgence is supported by focused supply management and an uptick in travel-related sales.

Outlook remains cautiously optimistic, but a bad monsoon can limit sales growth

With the onset of the festive season in September, the outlook remains cautiously optimistic, influenced by various factors affecting different industry segments. The onset of the festive season, starting with Onam, has boosted market sentiment, enhanced liquidity, and alleviated supply chain issues in all vehicle categories.


In the two-wheeler sector, a wider range of models is available, but subdued rural demand due to insufficient rainfall may limit sales growth. For commercial vehicles, bulk transactions and the favourable timing coinciding with the September construction season contribute to optimism, with the real sales boost expected during Navratri and Deepavali after the Shraadh period.


In the passenger vehicle market, new product launches and improved stock availability are positive signs, though high customer discount expectations and Shraadh period impacts may pose challenges.


Rural demand, stagnant for a while, is showing signs of recovery, but its sustainability hinges on the final monsoon phase's performance. Inadequate rainfall could trigger inflation, impacting consumer purchasing power and demand, affecting crop yields and subsequent sowing seasons. These potential challenges align with India's peak festive season, particularly Navratri and Deepawali, traditionally marked by heightened consumer activity.