FADA remains cautiously optimistic despite automobile retail sales jump to record high

India’s automobile retail sales have clocked the best-ever performance in November, said Manish Raj Singhania, President of the Federation of Automobile Dealers Associations (FADA), adding that it was aided by robust registrations across segments including passenger vehicles, two-wheelers and commercial vehicles.

"November 2022 has clocked highest retails in the history of Indian automobile Industry with March'20 as an exception when retails were higher due to BSIV to BSVI transition," FADA President said in a statement.

Total auto retail sales in November 2022 rose 26 per cent mainly because of the positive run of festive sales to the Great Indian Wedding Season - from 14th November to 14th December. FADA’s latest report also added that all categories were in green with 2W, 3W, PV, Tractor and CV growing by 24 per cent, 80 per cent, 21 per cent, 57 per cent and 33 per cent respectively.

It further added that, when compared to the pre-covid month of 2019, overall retails for the second consecutive month closed in green by growing 1.5 per cent. Except 2W segment, which saw a marginal dip of -0.9 per cent, all the other categories -  3W, PV, Trac and CV - grew by 4 per cent, 5 per cent, 61 per cent and 6 per cent respectively. The 2W segment showed a growth of 24 per cent YoY but fell marginally by 0.9 per cent, when compared to Nov’19, a pre-covid year.

According to the report, domestic passenger vehicle retail sales rose 21 per cent YoY last month to cross the 3 lakh unit mark in November. This was mainly because of the better availability of models, new launches and an increase in demand in rural areas.

The overall passenger vehicle retail sales in November 2022 increased to 3,00,922 units, as against 2,48,052 units in November 2021.

Singhania said, ”Better availability of model mixes from past months, new launches and increase in rural demand continues to keep the segment in healthy condition. Compact SUV and SUV category coupled with higher variant models continues to rule to roost.”

Aided by brisk offtake, two-wheeler retails rose to 18,47,708 units last month, up 24 per cent, as against 14,94,797 units in November 2021. On the other hand, commercial vehicle sales grew by 33 per cent to 79,369 units last month, as compared with 59,765 units in November 2021.

FADA’s report also highlighted that in terms of near-term outlook, the ongoing festive season has continued to help in bringing customers to the showrooms as of date. It added that the “RBI’s latest Consumer Confidence Data suggests that buoyancy among customers is on a recovery path on account of better perceptions on general economic situation, employment, and household income.”

The report, while mentioning the price hikes in the automobile segment going forward, said that to counter this and for the lower end of the pyramid, original equipment manufacturers (OEMs) have started announcing discounts for slow-moving products, lower variants and clearing their year-end stocks.

However, with RBI increasing the repo rate by 35 bps (225 bps increase since May 2022) and continuing to hint at more hikes in future, believes that it would further lead to a higher cost of borrowing apart from the price hikes done by OEMs and may dent the consumer confidence, especially in 2W and entry-level PV segment.

Along with this, the China lockdown may also play its part in slowing the supply of semiconductors and if this happens, it may act as a speed-breaker and add to the supply-demand mismatch which was improving in the last few months. Due to these reasons, FADA remains cautiously optimistic in the near term.