The decision of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) to keep lending rates unchanged at 6.5 per cent would continue to adversely affect the retail sales of all vehicles, especially entry-level vehicles as these buyers are highly price sensitive, said the Federation of Automobile Dealers Associations (FADA) while releasing the monthly retail sales numbers for March.
FADA stated that given the ongoing inflationary trend without any respite in finance rates, these prospective buyers might continue to hesitate.
With a significant decline in consumer sentiment among urban Indians, as reported by the Centre for Monitoring Indian Economy (CMIE), the automotive sector is facing a nuanced challenge. This downturn, marked by a restraint in discretionary spending within urban income groups, adds complexity to the industry’s landscape, it added.
Automobile dealers feel that, coupled with the upcoming elections, these challenges will influence the industry, potentially curbing vehicle sales across all segments.
Regarding the FY25 outlook, FADA believes the auto industry is poised for growth amid a mix of optimism and challenges.
Manish Raj Singhania, president of FADA, said that favourable government policies along with government spending, and the expected good monsoons, are likely to fuel demand, particularly in rural areas this year.
In March 2024, the Indian Auto Retail sector experienced modest growth of 3.14 per cent year-on-year. The two-wheeler and three-wheeler segments saw increases of 5 per cent and 17 per cent respectively, while passenger vehicles (PV), tractors, and commercial vehicles faced declines of 6 per cent, 3 per cent, and 6 per cent respectively.
FADA mentioned that commercial vehicles (CV) saw a temporary reduction in purchases following the election announcement, but there is an expectation of recovery post-election as concerns around the upcoming monsoons are diminishing.
The Indian Auto Retail sector achieved a double-digit growth of 10 per cent year-on-year across all categories, with two-wheelers, three-wheelers, passenger vehicles, tractors, and commercial vehicles registering increases of 9 per cent, 49 per cent, 8.45 per cent, 8 per cent, and 5 per cent respectively.
As PV, tractors, and three-wheelers set new record highs in retail sales, FADA stated that two-wheelers saw a 9 per cent growth; three-wheeler retail sales grew by 49 per cent; PV sales grew by 8.45 per cent; and CV sales experienced a 5 per cent growth in FY24.
