FADA Cautiously Optimistic As Auto Sales Grow In May

Mobility Outlook Bureau
05 Jun 2023
12:17 PM
2 Min Read

The month also saw an increased penetration of EVs, accounting for 8% of total sales.

Vehicle manufacturing

With over 2,019,414 vehicles registered in May, auto retail sales in the month demonstrated a 10% growth from 1,833,421 units sold in the same period last year. 

Further, May showcased an increased penetration of EVs, accounting for 8% of total sales, with 2Ws contributing 7%, 3Ws 56%, CVs 0.5% and PVs 2.5%.

Manish Raj Singhania, President, FADA, said, “May has been an encouraging month for the auto retail industry. We have seen a resurgence in the 2W, 3W, PV, tractor and CV segments with growth rates of 9%, 79%, 4%, 10%, and 7% respectively.”

3Ws Surge Ahead

Three-wheelers (3Ws) once again emerged as one of the fastest-growing vehicle segments. Against 44,482 units sold in May 2022, this year saw the tally increase to 79,433 units,a growth of 78.57% YoY.

Consequently, the 3W segment contributed to a lion’s share of overall EV sales in the country. In numbers, e-rickshaw (P) sales grew from 21,045 units in May 2022 to 36,755 units. Sales of e-rickshaws with carts increased from 1,826 units in May 2022 to 3,210 units.

Passenger 3Ws grew the most at 106.19%  with 31,297 units sold in May against 15,179 last year.

2Ws Recover In Rural India

With sales of 1,493,234 units, the 2W sector posted 9.32% YoY growth from 1,365,924 sold in May 2022. Singhania said 2W sales were positively influenced by seasonal factors like the marriage season, changes in the FAME subsidies effective from June (which saw pre-buying in May) and the recovery of rural demand. All these augur well especially in the aftermath of the COVID-19 pandemic.

We recently wrote about legacy OEMs selling more electric scooters in May, the period when the slash in FAME II subsidies was announced. You can read that article here. (Bajaj, TVS, Vida Gain After FAME Subsidy Cut)

Vehicle retail data - May 2023
Vehicle retail data - May 2023

In the passenger vehicle (PV) segment, improved availability of vehicles, strength of pending orders, and robust demand for new launches led to a positive momentum. Overall sales were 298,873 units, a growth of 4.31% from 286,523 PVs sold in May last year.

Tractors, CVs Continue Momentum

With 70,739 tractor units sold in May, the growth recorded was 9.63% from 64,528 tractor units retailed in 2022. According to Singhania, the commercial vehicle segment also saw sustained growth thanks to infrastructure development. 

Buses also witnessed a significant increase, driven by improved financing options and higher sales in academic institutions. Posting 7.19% YoY growth, CV sales were 77,135 units, up from 71,964 units sold in May 2022.

Diverse Challenges

In this backdrop, there are some grim realities to factor in, cautions FADA. The auto retail sector faces diverse challenges across the 2W, CV and PV segments. For 2Ws, seasonal factors could boost demand, but concerns like weather-induced walk-in reductions, inventory, and regulatory norms persist. 

The CV sector anticipates improved vehicle availability but concerns about RDE norms and seasonal effects may impact sales. The PV sector expects increased demand, particularly for new models, compact and full-sized SUVs and EVs, but inventory pressure and right model availability could pose challenges.

FADA advocates a balanced auto retail ecosystem, urging collective action to regulate inventory levels, negotiate lower interest rates and support 2W dealers by eliminating illegal MBO sales. While acknowledging near-term challenges, FADA maintains a stance of cautious optimism, highlighting the potential for growth through collaborative efforts and alignment with market trends.

The anticipated stable interest rates by RBI's monetary policy committee can maintain vehicle demand and positively impact auto sales. However, supply chain issues, demand-supply dynamics, and regulatory changes also play a role in shaping the auto retail outlook. 

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