Auto retail sales dip 5% in December after two-month cruising: FADA

Automotive (auto) retail sales in India saw a 5 per cent dip in December 2022 after a two-month good run, mainly due to a 11 per cent decline in two-wheeler sales, reveals data released by the Federation of Automobile Dealers Associations (FADA). The downer comes at a time when FADA’s wholesale numbers revealed better figures earlier this month.

Other than two-wheelers, FADA numbers showed all other categories being in the green in December, with three-wheeler, passenger vehicle (PV), tractor, and commercial vehicle during the same period posting growth of 42 per cent, 8 per cent, 5 per cent, and 11 per cent, respectively.

Commercial vehicle sales figures out early this month were up 20 per cent, tractor sales 28 per cent, PVs 8 per cent, and two-wheelers marginally up 2 per cent, highlighted a report by Axis Securities.

The Indian auto industry’s domestic PV sales in December 2022 were 276,000 units, 8.3 per cent higher than in December 2021, according to company numbers.

“Due to rise in inflation, increased cost of ownership in the rural market yet to pick up fully, and buoyant electric vehicle (EV) sales, the internal combustion engine two-wheeler segment is yet to see green shoots,” said Manish Raj Singhania, president, FADA.

However, FADA numbers showed that compared to the pre-Covid month of December 2019, total retails were down 12 per cent. The two-wheeler segment pulled down total sales as they fell 21 per cent. All the other categories like three-wheeler, PV, tractor, and commercial vehicle showed growth of 4 per cent, 21 per cent, 27 per cent and 9 per cent, respectively.

For Calendar 2022 (CY22), while total vehicle retails grew 15 per cent on-year and 17 per cent compared with Calendar 2020 (CY20), it failed to surpass 2019 (CY19) retails - a pre-Covid year - and registered a fall of 10 per cent.

The PV category during this period continued to gain new ground by clocking 3.43 million retails during the full year. This is by far the highest retails PVs have done to date. The two-wheeler segment failed to impress in 2022 as retail sales during December 2022 continued to fall after two good months.

He added that the approaching Bharat Stage (BS) VI Phase II norms in April and the plan to make six airbags mandatory are expected to increase the cost of vehicles in the months ahead, putting a dampener on the industry.

“In India, demand will sustain in 2023 in all segments. There will not be any impact felt either of the global slowdown or of China’s Covid outbreak,” said a senior executive of a commercial vehicle major.

The three-wheeler segment is on the mend and has almost closed the gap that had widened after the pandemic breakout. Within the segment, it is the electric rickshaw sub-segment showing threefold growth, consequently pushing the EV market share above the 50 per cent mark.

“The PV segment has continued to show remarkable consistency in growth during the entire year. While supply woes have diminished, better product spread and high consumer offers have sustained consumer interest. The commercial vehicle segment has continued to grow during the entire CY22 and is now almost on a level with CY19 retails,” he added. This is due to an uptick in demand for light-commercial vehicles, heavy-commercial vehicles, buses, and construction equipment.

Besides PV, the tractor segment has surpassed 2020, 2021, and pre-Covid year of 2019. It has also registered fresh lifetime high sales of 794,000 units.

“This was possible due to a consistently good monsoon, improved cash flow with farmers, better minimum support price for crops, and the government’s focus on better procurement. The timely sowing of the rabi crop also helped sustain the momentum. Festival season sales, too, played their part in this momentum,” he added.

FADA said due to inflation pressure and the imminent change in vehicle norms resulting in price hikes, it remains cautious about the fourth quarter of 2022-23.

“The first 15 days of January usually see low sales before Lohri/Sankranti. Auto original equipment manufacturers (OEMs) have done routine price hikes in December and announced the same at the beginning of this year. Once BSVI Phase II norms roll in, there will be further price hikes across all categories. To counter this, auto OEMs should announce special schemes for retail sales momentum to persist,” he added.