Auto retail in India could see moderation across segments in coming months

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The automotive retail sales in India across segments have witnessed its best-ever performance in the first 7 months of FY2024. Interestingly, the passenger vehicle segment has seen a robust growth performance, led by new product launches, demand for SUVs, and premiumisation.

In the commercial vehicle space, the wholesale and retail are in the positive, but the pace of growth seems to have started seeing some moderation.

A closer look at the retail sales during thefestive seasonsaw the overall auto retail sales touch 37.93 lakh vehicles, up 19 percent YoY. This includes 28.93 two-wheelers, up 21 percent YoY, 1.42 lakh three-wheelers, up 41 percent YoY, 1.23 lakh commercial vehicles, up 8 percent YoY and 5.47 lakh passenger vehicles, up 10 percent YoY.

Bharat Dhawan, Managing Partner, Mazars in India said, “In the ever-evolving landscape of India’s automotive sector, Q2 FY2024 mirrors a compelling narrative of resilience and adaptation. Beyond the numbers, our report underscores the industry’s strategic embrace of electric mobility and heightened safety standards, setting the stage for a sustainable and innovative future.”

Segment-wise performance

The two-wheeler segment which had been reeling under pressure saw significant improvements during the festive period. The upcoming marriage season aided the recovery in rural demand. Discounts and offers too have aided demand, but will the demand be sustained is yet to be seen.

In the passenger vehicle segment, the sales of SUVs have been the driving force which clocked an impressive growth of 23.5 percent and claimed a dominant 59.5 percent share of domestic sales.

A report by Mazars states that passenger vehicle sales grew at a much faster pace than domestic sales, surging by 15.1 percent to 1.8 lakh units in Q2 FY2024. While passenger car exports grew by 24.1 percent, SUVs exports faced a marginal contraction of 1.9 percent.

The commercial vehicle segment saw sales of 2.5 lakh units in Q2 FY2024, up 6.9 percent. The M&HCVs segment experienced a robust 17.6 percent growth. The segment is being benefited on the back of infrastructure activity.

Future outlook

Mazar’s report states that India’s automotive industry displayed positive momentum in Q2 FY2024, marked by growth in EVs, safety trends, and a shift towards digitalisation. Challenges persist in exports and specific segments, but the overall outlook remains optimistic, with substantial opportunities for growth and investment.

A report by ICRA says that while the overall industry is in the positive, the recovery in the two-wheeler space remains uncertain. This is because interest rates remain high, uncertainty in demand especially for the entry-level two-wheelers in the rural space, and a weak export outlook.

The passenger vehicle segment on the other hand especially the premium segment is expected to continue to benefit from robust demand, new product launches and improvements in economic activity will aid the sector. Adjustment for an increase in raw material price leading to a hike in PV costs could have some impact on the demand.

In terms of new regulations, scrappage policy and continued focus on infrastructurecreation are expected to aid the demand for commercial vehicles. A hike in interest rates could have some impact on the demand.