Strong car sales boost economy: The Indian car market has once again regained its position as the world’s third-largest car market after weak domestic car sales in December on the back of strong festive car buying seen during Diwali last year. In January 2024, strong unit sales were recorded.
The Federation of Automobile Dealers Associations (FADA) in January announced sales figures for January, showing that the automotive retail market will be strong in January 2024, with significant growth in all vehicle categories and an overall expansion of 15%. It was announced that it was the start of this year. Will FADA’s January car sales figures, released a day after the country recorded a decline in headline inflation and healthy employment figures, be a blow to the auto sector in 2024? Republic Business digs deep.
The driving force behind growth
Balancing growth signals and navigating challenges towards February 2024 presents a multifaceted outlook for the Indian auto retail industry. Dealers expect growth, but it’s important to be aware of common challenges that require careful navigation, including factors driving growth and demand.
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The ongoing wedding season and expected revenue from agricultural sales provide a positive basis for continued consumer spending, supporting the growth of the two-wheeler sector. Also, new launch momentum leads to increased vehicle availability and successful introduction of new models across all sectors stimulates market demand.
Good budgetary policies post-union are expected to boost the growth of the CV sector, especially in infrastructure-related industries.
In addition to demand for SUVs, the introduction of new models, increased availability, effective marketing, consumer incentives and an auspicious wedding season supported this strong performance. However, despite these achievements,
Frontline non-urban centers
The surge in vehicle sales was driven by two-wheelers, with a notable growth of 15 per cent, followed by three-wheelers at 37 per cent, passenger vehicles (PVs) at 13 per cent, tractors at 21 per cent and commercial vehicles (CVs). FADA data revealed a slight increase of 0.1 percent.
“Demand for two-wheelers remained resilient, primarily due to continued strength in rural markets. The segment benefits from the government’s positive crop production forecasts and continued support for rural economic growth. The market remains well-positioned,” the report said, adding that demand for two-wheelers remains stable, supported by continued strength in rural markets.
Tractor sales recovered significantly after a period of weakness in the previous month. This resurgence can be attributed to expectations of good crop yields in Rabi and favorable weather conditions for wheat cultivation, the report said.
“The segment is likely to benefit from the government’s bumper crop production forecast and continued support for the rural economy. The passenger vehicle sector hit a new record high in January with sales of 393,250 units. “This exceeded the previous record set in November 2023,” the report said.
However, there are persistent concerns about high inventory levels, which remain in the 50-55 day range, posing a challenge for auto dealers. The auto industry lobby report further stated that tractor sales showed a positive increase after the previous month’s slump, driven by good crop yields in Rabi and hopes of favorable weather conditions for wheat cultivation. Ta.
Overall industry growth
According to the FADA sales report, January was a historic milestone for the passenger car sector, with retail sales reaching an unprecedented 393,250 units, surpassing the previous record set in November 2023.
Despite these gains, concerns remain over high inventory levels, which continue to hover between 50 and 55 days, posing a challenge for car dealers, according to the FADA report. . January saw significant growth across all auto categories, with the overall auto retail market expanding by 15%.
Commenting on the automotive retail sales, FADA Chairman Manish Raj Singhania said, “January 2024 has seen a strong start to the calendar year, with overall retail sales increasing by 15% year-on-year.” Stated. All vehicle categories such as two-wheelers, three-wheelers, passenger cars, tractors and CVs achieved positive growth of 15%, 37%, 13%, 21% and 0.1% respectively over the previous year,” Singhania said. .
Several positive trends in the two-wheeler market indicate a strong start to the year, with adjustments following the introduction of the OBD 2 standard, the introduction of new models, and a shift towards premium options all on the back of increased vehicle availability. was shown. There is demand, FADA said in the report.
“The introduction of the OBD 2 standard, coupled with a bumper harvest, a strong wedding season, and effective follow-up and offers, points to a favorable trajectory for the 2W sector. Moreover, despite the lack of supply, interest in electric vehicles continues to grow. “This rise highlights the evolving consumer preferences in this sector,” the report said.
Cautiously optimistic about resumes
The commercial vehicle segment is likely to see some demand decline in the fourth quarter due to high base effects and upcoming elections. However, long-term fundamentals remain positive and a post-election recovery is expected as underlying industries resume bidding processes.
The report revealed that the situation in the three-wheeler sector is complex. While growth and an optimistic outlook continue for the commercial three-wheeler market, increasing competition from electric models highlights a major shift in the market, which is now 55% electric.
“January 2024 presented a complex scenario for the CV segment, showing limited year-on-year growth. On the other hand, increased infrastructure development, port activities and higher crop yields , certain market segments were energized. However, this momentum was hampered by extreme weather conditions, tight liquidity, high vehicle prices, and further restrictions on financing,” the report said.
In what was a record-breaking month, the solar power sector achieved an all-time high retail sales of 3,93,250 units and a staggering 13% year-on-year growth. There are still serious concerns about solar inventory levels, which are currently in the 50-55 day range. This requires immediate readjustment of production by OEMs to match actual market demand and avoid future oversupply issues. Adaptability is critical in this dynamic industry, so OEMs must balance innovation and strategic production planning to ensure sustained success and overall market stability.” FADA Sales the report added.