Despite bumper sales during festive season, here's why auto dealers still remain cautious

After mixed signals for the past several quarters, the festive season has finally brought cheers to auto makers and dealers in the country. As sales of automobiles - from two and three-wheelers to passenger cars - jumped to record levels during the 42-odd day period between the first day of Navratri and 15 days post-Dhanteras. The auto dealers, however, remain cautious as a sustained recovery is still some time away.

During the festive season this time, sales of automobiles surged by a healthy 19 per cent to a record 3,793,584 units - up from 3,195,213 units that the auto dealers in the country had sold in the same period in 2022 - data from industry body Federation of Automobile Dealers Associations (FADA) shows. Sales of passenger vehicles (PVs) surged 10.3 per cent year-on-year to 547,246 units in 2023 from 496,047 units last year. In fact, it was the first time when sales of PVs crossed the 500,000 units mark during the festive period in India. While three-wheeler sales jumped 41.4 per cent to 142,875 units.

It was the two-wheeler segment that boosted the overall auto sales numbers at the dealer level to the greatest extent. Two-wheeler sales were suffering since the COVID-19 pandemic disrupted the economy and impacted household incomes, especially among the lower socio-economic strata. In 2023, however, sales of two-wheelers grew by close to 21 per cent to scale a new high of 2,893,107 units - over the 2,396,665 units that were sold in the last festive period. According to Manish Raj Singhania, President, FADA the upswing in two-wheeler sales helped the overall numbers as it forms the largest chunk - close to 76 per cent of all automobiles sold in the country.

“The surge in two-wheeler sales to the unprecedented levels boosted the auto sales numbers to a new high during this festive season. While the PV sales also grew to a record level - crossing the 500,000 mark for the first time,” he tells Business Today. While in recent past two-wheeler sales were impacted due to poor demand from the rural market that forms nearly 70 per cent of the overall two-wheeler market, in the festive period rural consumers flocked auto dealers.

That, however, is not making them breath a sigh of relief yet as concerns remain. According to Singhania, while sales of two-wheelers may have jumped due to rural consumers coming back to the market but the festive sales cannot be taken alone as an indicator of an overall recovery in the hinterlands. As consumers tend to purchase items beyond their grasp during the period, it would be wise to wait for a few more months before concluding about a demand recovery in the rural market, he says. “I would rather wait for another 4-5 months to be sure that sales have in fact bounced back in the rural areas,” says Singhania.