February 2024 presents a contrasting picture for Indian auto retail. The ongoing marriage season and anticipated income from agricultural sales is expected to provide a positive foundation for continued consumer spending, supporting growth in both the two-wheeler (2W) and passenger vehicle (PV) segments.

While the industry outlook leans towards cautious optimism, with growth potential in the near term, it’s crucial to acknowledge the prevailing challenges, including the upcoming elections, which could turn consumers cautious, affecting purchasing decisions across vehicle segments, the Federation of Automobile Dealers’ Associations (FADA) said on Tuesday.

Also, persistent supply bottlenecks for specific high-demand models presents a risk factor for consistent growth across the 2W, commercial vehicle (CV) and PV segments, highlighting the need for original equipment manufacturers (OEMs) to optimise production lines.

Fluctuating market liquidity and the potential for tighter financing in the CV sector also calls for a relook at financing solutions, it said.

But, factors promoting growth include increased vehicle availability, introduction of new models across segments, and favourable post-Budget policies that are expected to drive growth in the CV sector, particularly within infrastructure-related industries, the industry body said.

The Government’s optimistic crop production estimates and continued support measures are expected to boost the rural economy, potentially leading to even higher tractor demand, and increased sales of entry-level 2Ws in rural areas, it said.

PV sales hit new high

Meanwhile, in its monthly retail sales data, FADA said the PV segment achieved all-time high retail sales of 3,93,250 units, an impressive 13 per cent year-on-year (YoY) growth as compared with 3,47,086 units in January 2023. “SUV demand, along with the introduction of new models, greater availability, effective marketing, consumer schemes and the auspicious wedding season, underpinned this strong performance,” Manish Raj Singhania, President, FADA, said.

January 2024 began on a promising note, demonstrating 15 per cent overall retail growth, compared to the previous year. All vehicle categories – 2W, 3W, PV, tractors, and CV – achieved positive YoY growth of 15 per cent, 37 per cent, 13 per cent, 21 per cent, and 0.1 per cent, respectively, he said.

Overall sales across categories grew by 15 per cent YoY to 21,27,653 units in January, as compared with 18,49,691 units in the same month last year.

“However, despite this achievement, serious concerns remain regarding PV inventory levels, now in the 50-55 day range. This calls for immediate recalibration of production by OEMs to better align with actual market demand to avoid future oversupply issues. As adaptability is crucial in the industry, OEMs must balance innovation with strategic production planning to ensure sustained success and overall market stability,” Singhania added.