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The Reserve Bank of India (RBI’s) decision to keep lending rates unchanged at 6.5 per cent would impact retail sales of all vehicles, especially entry level vehicles. This would hit the automotive sector, which already faces the challenge of a notable decline in consumer sentiment among urban Indians, as reported by the Centre for Monitoring Indian Economy (CMIE).
According to the Federation of Automobile Dealers Associations’ (FADA), the downturn in consumer sentiment, characterised by restrained discretionary spending within urban income brackets, adds a layer of complexity to the industry landscape.
“In this scenario, the decision of the Monetary Policy Committee (MPC) to keep lending rates unchanged at 6.5 per cent would continue to badly impact retail sales of all vehicles, especially entry- level vehicles, as these buyers are extremely price sensitive. Given the continued inflationary trend without any relief in finance rates, these prospective buyers may continue to hesitate,” Manish Raj Singhania, President, FADA, said in the monthly report of automobile retail sales performance on Monday.
Coupled with the forthcoming elections, these challenges are likely to impact the industry, potentially curbing vehicle sales across all segments. Despite this, opportunities for a rebound and growth linger, bolstered by festive occasions and strategic product unveilings aimed at reviving consumer interest, he said.
“As it navigates a period marked by careful optimism, the sector is positioned for a cautious yet hopeful trajectory towards recovery. The industry’s strategic foresight and adaptability promise a pathway to resilience and sustained growth, even as it confronts evolving market conditions,” Singhania added.
Passenger vehicle sales down
Meanwhile, FADA in its monthly report, said passenger vehicle (PV) retail sales declined by six per cent year-on-year (YoY) to 3,22,345 in March, as compared with 3,43,527 units in the same month last year.
Two-wheeler (2W) sales grew by 5.44 per cent YoY to 15,29,875 units during the month, as against 14,50,913 units in the corresponding month last year.
Three-wheeler (3W) sales grew by double digits (17 per cent) YoY to 1,05,222 units in March, as compared with 89,837 units in March 2023.
However, commercial vehicle (CV) sales declined by around six per cent YoY to 91,289 units last month, as compared with 96,984 units in March 2023.
Tractor retail sales also declined by more than three per cent YoY to 78,446 units during the month, as compared with 81,148 units in the corresponding month last year.
The grand total of retail sales of all vehicles across categories grew by a little more than three per cent to 21,27,177 units in March, as compared with 20,62,409 units in March last year, the data shared by FADA said.
On an annual basis, PV retail sales grew by 8.45 per cent to 39,48,143 units in FY2023-24 (FY24), as compared with 36,40,399 units in FY23.
Similarly, 2W sales grew by 9.30 per cent to 1,75,17,173 units in FY24, as compared with 1,60,27,411 units in FY23.
Retail sales of 3Ws grew by 49 per cent to 11,65,699 units last year, as compared with 7,83,257 units in FY23.
CV sales grew by around five per cent to 10,07,006 units, as against 9,60,655 units in the previous financial year. Tractor sales also grew by 7.55 per cent to 8,92,313 units in FY24, as compared with 8,29,639 units in FY23.
The grand total of vehicles across categories grew by 10.29 per cent in FY24 to 2,45,30,334 units, as against 2,22,41,361 units in FY23, FADA reported.
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