Better Kharif sowing in the wake of normal monsoon plus the newly-elected government’s increase in minimum support prices for kharif crops is expected to improve disposable incomes in rural India, potentially enhancing auto retail performance, said an industry body on Friday.

Based on current market conditions, the overall rating for July auto retail performance is cautiously optimistic with a moderate outlook. While some segments may see improved activity, overall growth is likely to be tempered by persistent challenges, the Federation of Automobile Dealers Associations (FADA) said on Friday while sharing June’s monthly retail sales data.

“Dealer feedback across the 2W, PV and CV segments presents a cautious picture. While dealers anticipate better sales due to improved supply and new product launches, they express concerns over low customer inquiries and market sentiment dampened by heavy rains,” Manish Raj Singhania, President of FADA, said.

On monthly retail sales, he said Indian automobile retail experienced a modest year-on-year (YoY) growth of just 0.73 per cent in June compared to the same month last year. While the 2W and three-wheeler (3W) segments registered positive YoY growths of 4.66 per cent and 5.1 per cent, respectively, other categories such as PV, tractors, and CV saw declines of 6.7 per cent, 28.3 per cent, and 4.7 per cent YoY, respectively.

In the PV segment, retail sales declined to 2,81,566 units in June, compared with 3,02,000 units in the corresponding month last year. Similarly, CV sales declined to 72,747 units during the month, compared with 76,364 units in the same month last year.

“In the PV segment, the inventory levels have reached an all-time high, ranging from 62 to 67 days. Despite improved product availability and substantial discounts aimed at stimulating demand, market sentiment remains subdued due to extreme heat resulting in 15 per cent less walk-in’s and delayed monsoons. Dealer feedback highlights challenges such as low customer inquiries and postponed purchase decisions,” Singhania noted.

With the festive season still some time away, passenger vehicle manufacturers must exercise caution, he said, adding that effective inventory management strategies are essential to mitigate financial strain from high-interest costs. Therefore, FADA urged PV manufacturers to implement prudent inventory control and engage proactively with the market.

However, the FADA monthly data showed that 2W sales grew to 13,75,889 units in June, compared with 13,14,628 units in the same month last year. The monthly retail sales of 3W also went up to 94,321 units in June, compared with 89,743 units in June 2023.

The total sales of vehicles across categories grew to 18,95,552 units during the month, compared with 18,81,883 units in the corresponding month last year.

Meanwhile, FADA has also shared the vehicle retail strength index for the month on the basis of Urban and Rural Regional Transport Offices (RTOs), in which it said PV registrations in Urban RTOs jumped to 62.3 per cent in June as compared to 61.8 per cent in May.

But, in the 2W segment it was the opposite. The registrations of 2W in rural market was more at 58.6 per cent as compared with 41.4 per cent in the Urban markets in June.