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August auto sales up 9% YoY, monsoon worries linger

BusinessAugust auto sales up 9% YoY, monsoon worries linger

The automotive retail industry has advised a cautious stance on dispatches, despite optimism in the dealership network over a robust year-on-year growth of 9 per cent sales in the month of August, in view of the sub-optimal rainfall which could potentially affect the forthcoming festive season. Signalling a good pick-up in festive bookings, figures of the last month by the Federation of Automobile Dealers Associations (FADA) show a robust year-on-year growth of 6 per cent for two wheelers, passenger vehicles at 6.5 per cent, tractors rising 14 per cent and commercial vehicles up by 3 per cent.

Sequentially, on a month-on-month basis, the industry indicated positive performance with a 3 per cent growth in total auto retail sales, although the tractor segment experienced a substantial contraction. “Auto retail in August witnessed a promising growth, maintaining momentum similar to the preceding month. Concurrently, a 3 per cent MoM uptick suggests a reversal in short-term trends,” said FADA President Manish Raj Singhania. During MoM, all segments experienced growth, with the exception of tractors, which saw a 19 per cent decline. Evaluated against pre-pandemic metrics, the overall retail sales exhibited a modest 1 per cent growth, indicating nascent signs of recovery. Nomura Ratings’ dealer survey points towards a good pick-up in festive bookings but the same kind of response for 2Ws is is yet to be seen. “We do expect improvement. Government actions like reducing gas cylinder prices and potential reduction of fuel prices could offer support to the bottom of the pyramid. Overall, we believe the festive season should be strong this year for PVs. Healthy inventory, with a much higher supply for SUVs will support this. OEMs and dealers may also spend more on A&P to support sales,” says Nomura expert Kapil Singh.

Among the SUVs launched recently in the festive season is Honda Elevate, which will be available at an introductory starting price of INR 10,99,900 (ex-showroom, Delhi) to INR 15,99,900 (ex-showroom, Delhi) for the top variant. Deliveries of the Elevate have started across dealerships in the country. “There has been strong anticipation about the mid-size SUV in the Indian market,” says Takuya Tsumura, President & CEO of Honda Cars India. Customers are being offered purchase of high value accessories like ventilated seat top cover with massager, DVR & TPMS linked to H-Connect at all dealerships.
Tata Motors has unveiled the new Nexon with a major refresh and much enhanced features. “We believe it has the potential to be India’s leading SUV by volume (15-20k units per month) depending on pricing. We estimate Honda Elevate to sell 4-5k units per month,” says the Nomura analyst. In the PV arena, improved vehicle supply, bolstered by expanded customer schemes, has maintained positive market dynamics but supply chain bottlenecks persist, particularly in timely deliveries.

While the market has responded favourably to the introduction of new hybrid and CNG models, a constrained product range in popular segments such as mid-size SUVs, continues to limit overall potential. ”Significantly, inventory levels for PVs have surpassed the 60-day threshold, establishing an all-time high even before the onset of the 42 days festive period, which needs vigilant monitoring by PV OEMs,” said Singhania.

Hyundai Motor India launched the new Hyundai i20 to drive excitement in the hatchback segment with new benchmarks in car safety standards including 40+ advanced safety features, 26 safety features as standard including 6 airbags, electronic stability control, hill assist control, vehicle stability management, 3-point seat belt and 1.2l Kappa petrol engine with idle stop and go (ISG) for enhanced fuel efficiency. The PV market offers a mixed bag, according to FADA. Though new product launches and better stock availability are positive signs, high customer discount expectations remain a challenge.

The 3Wheeler segment, thought, not only maintained its momentum but set consecutive all-time high retail records as sales for August peaked at 99,907 units, marking a 66 per cent yoy and 6 per cent month-over-month growth. Within the 2W segment, despite positive growth, consumer sentiment remained ambivalent, impacting conversion rates and intensifying competition among key players. Royal Enfield launched the new Bullet on 1 September at INR 173k. “We estimate it to sell 13-15k units per month,” adds Singh.
The CV sector weathered the impact of sluggish cargo movement as the festive season projects market recovery, reinforced by priority supply scheduling and resurgence in travel-related sales. Aggressive promotional initiatives and enhanced customer sentiment further support this optimistic outlook.

The near term outlook of FADA remains cautiously optimistic, shaped by a multitude of factors that vary across vehicle segments. The onset of the festive season, beginning with Onam, has lifted the market mood, improved liquidity and eased earlier bottlenecks in the supply chain across all categories. In the 2W market, while a broader range of models is now available, subdued rural demand due to insufficient rainfall could temper sales growth. For CVs, although bulk deals and the favourable timing of the construction season in September add to the optimism, the real sales momentum is anticipated to pick up during the Navratri and Deepawali festival.

After a prolonged period of stagnation, rural demand is showing signs of a positive resurgence. However, this recovery remains tenuous, contingent on the performance of the final phase of the monsoon season. Lack of sufficient rainfall could precipitate a rise in inflation, adversely affecting consumer purchasing power and diminishing demand.

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