Automobile body FADA makes big bets on tier 2 and 3 cities | Image: Republic
Small town automatic acceleration: India’s car sales broke several records in 2023, with India’s tier 2 and tier 3 cities proving to be lucrative markets for car companies. The Federation of Automobile Dealers Associations (FADA), an industry association, is known for its facilitative role in ensuring that people from far-flung areas realize the dream of buying a car near their town. It is beingIn an exclusive interview with Republic workFADA vice-chairman CS Vigneshwar said that apart from levying low tax rates on vehicle purchases, setting up of sales and service vehicle facilities in small towns in the country must be approved by the government and given due incentives. Stated.
GST relief on car purchases
CS Vigneshwar, vice president, Federation of Automobile Dealers Associations (FADA), said the domestic auto sector strongly believes that lower Goods and Services Tax (GST) on vehicle purchases will boost sales. .
Vigneshwar, who has been at the helm of the country’s oldest dealership for commercial vehicle maker Volvo Eicher, said the reduction in GST on car purchases would trigger sales growth in all segments of cars. “If car sales increase, the government will be able to make up more tax revenue,” Vigneshwar said.
He said there is significant room for growth in domestic car sales. “FADA is very optimistic about the country’s GDP growth forecast as India continues to emerge as the fastest growing large economy,” Vigneshwar said. He said FADA’s recent forecasts reaffirmed that domestic passenger and commercial vehicle sales will be in the low single digits. “The growth trajectory for all two-wheeler segments and three-wheeler sales in the next financial year is likely to be around 15%,” he said.
Automobile sales and macro perspective
In the US automobile market, there are nearly 700 car owners per 1,000 people, and the sample size often reaches 900 car owners per 1,000 people. According to Vigneshwar, the percentage of individuals who own private cars in India is abysmal compared to the car penetration rates seen in the US car market.
“It is premature to conclude that the penetration of automobiles, especially passenger cars, in the country has reached a saturation point,” Vigneshwar said. The FADA Vice Chairman highlighted the increasing desire of people in small towns to upgrade to private cars, which presents a huge opportunity for car companies to increase sales even during non-holiday periods. “There is still a long way to go to achieve the desired intensity of public transport that improves mobility in small towns. Dealing with the ever-increasing commuter rush is a factor that the Indian automobile industry is well aware of and an underdeveloped “The lack of last-mile connectivity has probably driven the growth in car sales in rural India,” says Vigneshwar.
According to the FADA Vice Chairman, car sales in rural India in the last three to four financial years have witnessed a sharp increase in car sales across segments, especially in the post-COVID-19 phase when the market has recovered.” Vigneshwar said. . He said there has been significant growth in two-wheeler sales and car purchases, especially sales of new products in the SUV segment. “A recent statement sent by FADA to the government calls for a reduction in Goods and Services Tax (GST) levy on entry-level two-wheelers (below 150 cc). We are looking forward to this tax reduction,” he said.
EV sales growth
According to industry data, the market share of electric three-wheelers has reached 60 per cent in the current financial year out of the total three-wheeler sales in the Indian automobile market. FADA Vice Chairman, who runs one of the oldest automobile dealerships in the country, said that in terms of two-wheeler sales recorded during the current financial year, the market share of EVs is expected to reach the 5 per cent mark. .
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“Going forward, the automotive industry expects electric two-wheeler sales to grow significantly. Considering the increased focus on sustainability and increased usage of green fuels, we at FADA recently announced We expect the market share in two-wheeler sales to be around 12-15 per cent,” Vigneshwar said.
As for passenger cars, the EV market share is around 2%, but according to industry estimates, it could reach 5% in FY25. “Not only the strong sales of EVs, but even hybrid vehicles that run on battery and gasoline are gaining great acceptance among car buyers,” said the FADA vice chairman.