June 10th 2024.
In the bustling city of New Delhi, the Federation of Automobile Dealers Associations (FADA) shared some concerning news about the state of passenger vehicle retail sales. According to their report, there was a 1% decline in sales compared to the same time last year. This decline can be attributed to a few factors, including the intense heat of summer and the recent elections, which affected the demand for vehicles.
In May, there were only 303,358 passenger vehicle registrations, a decrease from the 335,123 units sold in May 2023. FADA President Manish Raj Singhania explained that dealers pointed to the effects of the elections, the scorching heat, and market liquidity issues as major contributors to the decrease in sales. Despite efforts to boost sales such as offering discounts and fulfilling pending bookings, there were still challenges in the form of limited new models, fierce competition, and inadequate marketing strategies by the original equipment manufacturers.
Moreover, Singhania noted that there were more customers postponing their purchase decisions and fewer inquiries in the month of May. The extreme heat also had a major impact as there was an 18% decrease in foot traffic in showrooms. However, there was a slight increase in two-wheeler sales, with 15,34,856 units sold in May compared to 14,97,778 units in the same month last year. Singhania attributed this growth to positive rural demand due to good rainfall in some regions and improved availability of financing options.
On a positive note, three-wheeler sales saw a significant increase of 20% with 98,265 units sold last month. The commercial vehicle segment also showed growth, with sales rising by 4% to 83,059 units compared to 79,807 units in May 2023. Singhania acknowledged that this growth was due to a low base from the previous year and an increase in bus orders. However, he also mentioned that the industry still faced challenges such as wholesale pressures, government policies, and negative market sentiment.
Looking ahead, Singhania expressed a cautiously optimistic outlook for automobile retail. He explained that there are both positive and challenging factors at play in various segments of the market. With the formation of a new government, there is hope for stability and improved market sentiment. Dealers are also optimistic about better supply and a positive outlook in key sectors such as cement, coal, and iron ore. Additionally, the above-normal monsoon is expected to boost rural demand and support economic activities. However, there are potential delays in purchase decisions due to extreme weather conditions and the reopening of schools in July.
As challenges persist, such as intense competition, lack of new model launches, and poor marketing efforts by OEMs, FADA will continue to monitor the situation closely. They represent over 15,000 automobile dealerships and have collated sales data from 1,360 out of 1,503 RTOs across the country. With a mix of positive and challenging factors, the near-term outlook for automobile retail remains uncertain, but FADA remains hopeful for a better future.
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