Auto Sales Back On Track, Budget Will Fuel Growth: FADA

Mobility Outlook Bureau
06 Feb 2023
01:17 PM
2 Min Read

The dealer association believes that rural India will also limp back to recovery, which augurs well for entry-level bikes and cars.

Auto Industry

January 2023 was a great start for the auto industry with every segment posting higher sales than the corresponding period of 2022.

FADA (Federation of Automobile Dealers Associations) data released on Monday shows that total sales were 1,826,669 units, a 13.56% jump from January 2022’s tally of 1,608,505 units. However, the numbers are still 8% below the January ’20 mark of 1,763,011 units, said Manish Raj Singhania, President, FADA.

The 2W segment grew by 10% YoY to 1,265,069 units in the month, compared to 1,149,351 units sold in January ’22. According to Singhania, when compared to 2021 and the pre-COVID period of January '20, the segment continued to face pressure with a fall of 7% and 13% respectively.

FADA believes that while sentiments are improving at a snail’s pace and better than what they were a year ago, the rural market is yet to fully join the party. Cost ownership has shot up significantly while disposable income has not increased in the same ratio.

The FADA chief referred to the Economic Survey 2023, which stated that rural wages would rise at a steady positive rate with inflation expected to soften and translate into more income. “We are hopeful that this will have its rub-off effect with a rise in 2-Wheeler sales going ahead,” he said.

PVs Full Steam Ahead

The good news is that the passenger vehicle segment continues to see brisk demand with the pandemic on the wane. FADA data shows that sales in January were 340,220 units, up 10% from January ’21 and 8% from ’20.

Singhania said good enquiries, healthy bookings and improved supplies are helping this segment. While the waiting period for some models have come down, compact SUVs, SUVs and luxury vehicles continue to see a wait of 2-3 months.

Representative image of a Hyundai dealership
Representative image of a Hyundai dealership.

He added that with China’s factory activity once again gaining pace, global supplies of parts and semiconductors will see a recovery thus aiding better vehicle supplies and lower waiting period. This will further fuel growth for the already healthy passenger vehicle category.

However it is the entry level sub segment which still continues to feel the brunt of rising vehicle costs. This segment could face further headwinds once the new BS VI phase 2 norms kick in and increase price tags.

CVs, 3Ws Zoom Ahead

Commercial vehicles and three-wheelers are also seeing higher demand with sales at 82,428 units and 65,796 units, up 58.6% and 16.34% respectively.

While the personal sub-segment in 3Ws fell by 1.85%, e-rickshaw passenger, e-rickshaw cargo, 3W cargo and 3W passenger grew 72.89%, 45.65%, 20% and 59.54% respectively. 

According to FADA data, the overall 3W segment saw 101% growth compared to ’21 and down by 3% from the pre-pandemic levels of ’20. The FADA President said the FAME 2 subsidy along with demand from commercial 3W space is fuelling healthy growth.

As for CVs, the light and heavy duty segments saw growth of 12.75% and 24.71% respectively while other categories reported an increase of 46.99%. However, medium commercial vehicles were down 1.58%.

Singhania said the CV category has also shown robust growth of 23% from January ’21 and 6% from ’20. This was thanks to a faster pace of fleet replacement, growth in freight availability and the focus on infrastructure projects.

Going forward, FADA believes that the recent announcements in Budget 2023 will continue to fuel growth across vehicle categories. Demand for entry level 2-Wheelers and PVs is likely to accelerate due to enhanced income tax rebate, budget allocation for vehicle scrappage policy and import duty exemption for manufacturing lithium batteries thus reducing EV acquisition cost.

A reduction in surcharge at the highest IT slab will also benefit high end vehicle sales. Apart from this, the capital outlay of INR 1,000,000 crore for infrastructure spending will power CV sales which are already on a roll.

Also Read:

Budget 2023 Live Updates: All about India’s Mobility Sector

Auto Sales Grew YoY In CY22 But Still Below CY19

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