Notwithstanding the steady YoY growth, the July auto sales numbers have raised some concerns. The reasons are not far to seek. The month-on-month trend is disappointing as there was a 5% decline in retail sales across all segments except three-wheelers.
The three-wheelers grew by 9% MoM. The remaining segments showed an MoM decline. Two-wheelers, passenger vehicles, and tractors have all reported MoM decline in retail sales of 6%, 4% and 8%, respectively. Commercial vehicle sales remained flat MoM at -0.2%.
Despite reasonable YoY growth numbers, things aren’t that good. A comparison with the pre-COVID levels suggests that the auto industry still has a long way to catch up.
Compared with pre-COVID figures, retail sales showed a 13% decline. The 2-wheeler segment grappled with a significant 23% dip. Commercial vehicles have indeed shown a 4% contraction.
The saving grace was three-wheelers which registered an all-time high sale of 94,148 units in July, translating to a 74% YoY and 9% MoM growth.
Still, the ensuing festival season gives some optimism to the auto industry if one were to go by the statement of the Federation of Automobile Dealers’ Association (FADA). Indications to the positivity could be gauged by the inventory level for passenger vehicles, which has surpassed the 50-day mark and currently hovers between 50-55 days, suggesting an inventory build-up in anticipation of the forthcoming festive season.
Still, there are several imponderables. The Indian Meteorological Department (IMD) has predicted below-average rainfall in August, throwing some apprehensions about Kharif crops. This could have a negative fall-out on the immediate resurgence of rural demand.
According to FADA, PV sales in July were “a mix of challenges and triumphs”. The month saw a surge in orders and timely OEM supplies, especially with the introduction of new products. SUVs continued to remain a popular choice.
The CV segment showed mixed dynamics. Despite robust stock availability and growth in areas like school buses, challenges from erratic weather and high vehicle costs affected the demand. The huge infra spend, however, gives considerable hope for the CVs.
Given the evolving dynamics, the current month could yet prove challenging.
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