Indian auto retail sector | Latest market updates

Auto Sales Growth Sees Modest 3.14% Increase in March, Surges over 10% for FY24

This article delves into the data released by the Federation of Automobile Dealers Associations (FADA) on vehicle retail for March 2024 and the entire financial year FY’24.

Modest Growth in March’24 Sales

Overall, the Indian auto retail sector witnessed a modest growth of 3.14% YoY in March 2024. This growth was driven by the two-wheeler (2W) and three-wheeler (3W) segments, which registered increases of 5% and 17% respectively. Passenger vehicles (PV), tractors (Trac), and commercial vehicles (CV) faced declines of 6%, 3%, and 6% respectively compared to March 2023.

A bright spot was the significant surge in electric vehicle (EV) sales due to the impending expiration of the FAME 2 subsidy on March 31st. This led to a jump in the 2W-EV market share to 9.12% for the first time. Manufacturers like Hero Electric, Bajaj Auto, TVS Motor Company, and Okinawa Autotech benefitted from this pre-buy ahead of the subsidy expiration.

While the market sentiment remained positive due to seasonal events, improved vehicle supply, and financial incentives, the industry grappled with challenges like economic concerns, election uncertainties, and intense competition.

Robust Growth in FY’24 Sales

Despite the mixed signals in March, the Indian Auto Retail sector achieved a commendable 10% YoY growth for the entire FY’24. All categories registered growth, with 2W, 3W, PV, Trac and CV segments growing by 9%, 49%, 8.45%, 8% and 5% respectively. Notably, the 3W, PV and Trac segments set new record highs, surpassing previous years’ performances.

  • Two-Wheeler (2W): A rich mix of factors, including enhanced model availability, new product launches, and positive market sentiment, fuelled the 9% growth in the 2W segment. The burgeoning EV market and strategic premium segment launches by companies like Bajaj Auto, Royal Enfield, and Hero MotoCorp also played a critical role in this growth.
  • Three-Wheeler (3W): The 3W segment witnessed a remarkable 49% YoY growth, setting a new industry benchmark. This achievement can be attributed to the introduction of cost-effective CNG fuel options and new EV models, alongside strong market sentiment and a focus on after-sales service by players like Bajaj Auto and Piaggio India.
  • Passenger Vehicles (PV): FY24 was a milestone year for the PV segment, with an 8.45% YoY growth and record-high sales. Improved vehicle availability, a compelling model mix with a strong focus on SUVs (now holding a 50% market share), and strategic marketing efforts by Maruti Suzuki, Hyundai, and Mahindra & Mahindra were the key drivers.
  • Commercial Vehicles (CV): The CV segment demonstrated its adaptability by registering a 5% growth in FY24. Improved vehicle supply, effective planning, and increased freight movement fuelled significant replacement purchases. Additionally, government tenders, better road connectivity, and bulk deals positively impacted companies like Tata Motors and Ashok Leyland.

Near-Term Outlook

The industry faces a nuanced challenge with a decline in consumer sentiment, especially among urban Indians. This, coupled with the Reserve Bank of India (RBI) maintaining lending rates, might dampen retail sales, particularly for entry-level vehicles which are highly price sensitive. The upcoming elections add another layer of complexity.

Despite these headwinds, opportunities for rebound and growth exist. Festive occasions and strategic product launches aimed at reviving consumer interest offer a glimmer of hope. The industry’s adaptability is further bolstered by improved supply dynamics and an increasing shift towards electric mobility, alongside enticing financing options. These factors can help mitigate the effects of the current economic sentiment and electoral caution.

The automotive sector’s resilience is thus highlighted, with concerted efforts to tackle these challenges through innovation and strategic market engagement. As it navigates through a period marked by careful optimism, the sector is positioned for a cautious yet hopeful trajectory towards recovery. The strategic foresight and adaptability demonstrated by the industry promise a pathway to resilience and sustained growth, even as it confronts evolving market conditions.

Long-Term Outlook: A Look Ahead

Heading into FY’25, the Indian Auto Industry is poised for growth amidst a mix of optimism and challenges. The excitement around new product launches, particularly electric vehicles, sets a forward-looking tone. Manufacturers like Tata Motors, Mahindra & Mahindra, Maruti Suzuki, and Hyundai are gearing up with better supply chains and a diverse range of models to meet evolving consumer demands. Economic growth, favourable government policies such as potential infrastructure spending, and an anticipated good monsoon are expected to fuel demand, especially in rural areas and the commercial vehicle sector, which is closely linked to infrastructure projects and economic activity.

Market sentiment is cautiously optimistic, with the industry banking on improved customer engagement and financing schemes to boost sales. However, challenges like a high base effect in the PV segment and intense competition from both domestic and international players remain. The focus will be on overcoming these hurdles with innovation and strategic market engagement, aiming for balanced growth across all segments. As FY’25 unfolds, the Indian Auto Industry is navigating through evolving market demands and economic conditions, leveraging its strengths for sustainable growth and a wider reach.

Table 1: Motor Vehicle Road Tax Collection (FY’23 vs FY’24)

Fiscal Year Road Tax Collection (in Rs Crore)
FY’24 79,673
FY’23 70,045
YoY% 14%

This table showcases a healthy 14% growth in Motor Vehicle Road Tax Collection in FY’24 compared to FY’23, indicating a rise in vehicle sales and potentially positive industry trends.

Table 2: Vehicle Retail Data for FY’24 (compared to FY’23)

2W 1,75,17,173 1,60,27,411 9.30%
3W 11,65,699 7,83,257 48.83%
E-RICKSHAW(P) 4,90,726 3,49,892 40.25%
E-RICKSHAW WITH CART (G) 40,798 24,076 69.46%
THREE-WHEELER (GOODS) 1,21,506 90,923 33.64%
THREE-WHEELER (PASSENGER) 5,11,754 3,17,753 61.05%
PV 39,48,143 36,40,399 8.45%
TRAC 8,92,313 8,29,639 7.55%
CV 10,07,006 9,60,655 4.82%
LCV 5,61,097 5,67,302 -1.09%
MCV 72,907 62,056 17.49%
HCV 3,24,308 3,01,421 7.59%
Others 48,694 29,876 62.99%
Total 2,45,30,334 2,22,41,361 10.29%

This table provides the vehicle retail data for the financial year FY’24, comparing it with FY’23, along with the year-on-year (YoY) percentage change.

Conclusion: A Cautiously Optimistic Future for the Indian Auto Industry

FADA data reveals a mixed performance for the Indian auto industry. While March sales were modest, FY’24 delivered strong growth, supported by a rise in Motor Vehicle Road Tax Collection. The near-term outlook is cautious due to economic concerns and elections, but opportunities exist in electric vehicles and strategic product launches.

Looking ahead, FY’25 appears cautiously optimistic. Economic growth, government policies, and a good monsoon are positive indicators. Manufacturers are adapting to meet evolving consumer demands. Challenges remain, but the industry’s focus on innovation and market engagement is crucial for balanced growth.

In conclusion, the Indian auto industry is resilient and forward-looking. By embracing innovation, engaging the market strategically, and capitalizing on electric vehicles, the industry is well-positioned for long-term success. Investors should monitor market dynamics, government policies, and new product launches, especially in EVs.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.