January auto sales rise 14% y-o-y but sentiment improving at a snail’s pace, says FADA
- Auto sales in January 2023 were down 8% from the pre-Covid month of January 2020, says data from FADA.
- Cost of ownership has shot up significantly while disposable income has not increased in the same ratio, says Manish Raj Singhania, president of FADA.
- The 3-wheeler segment has almost clawed back to pre-pandemic levels.
- FADA predicts that China’s factory activity gaining pace can fuel further growth in passenger vehicle sales.
AdvertisementCompared to last year, India’s January auto sales are robust as total vehicles sold increased by around 14%. But that, however, is not the whole story. Even as the pandemic seems to be behind us, auto sales have not yet reached their pre-Covid levels.
As compared to January 2020, auto sales in January 2023 were down by 8%, says data by Federation of Automobile Dealers Associations or FADA.
“While sentiments are improving at a snail’s pace and are better than what it was a year ago, rural market is yet to fully come to the party as cost of ownership has shot up significantly while disposable income has not increased in the same ratio,” said Manish Raj Singhania, president of FADA.
A recent report by JM Financial also said that the Union Budget 2023-24 had no specific triggers for rural growth. That would affect their spending capability with a spillover effect on the 2-wheeler segment.
“In the absence of a specific focus on the rural economy in the Union Budget for 2023-24, analysts don't see immediate triggers for revival in the rural economy. Moreover, in the absence of specific or enhancement of allocation towards the rural economy, we believe that the rural environment would have to revive on its own. Hence, we would view businesses dealing with price-sensitive low-ticket items as less likely to benefit,” the JM Financial report said.
When compared to January 2021 and pre-covid month of January 2020, sales of two-wheelers fell by 7% and 13%, respectively. However, on a year-on-year basis (compared to January 2022), it did show a growth of 10%.
The economic survey 2022-23 tabled in the Parliament said that rural wages will rise at a steady positive rate as inflation is expected to soften thus translating into rise in real wages. “We are hopeful that this will have its rub-off effect with a rise in 2-wheeler sales going ahead,” FADA says in its outlook.
January 2023 auto sales data
|Category||January 2023||January 2022||YOY change|
|Total (incl others)||18,26,669||16,08,505||13.56%|
3Ws win the race
Three-wheelers (3Ws), on the other hand, are having a much better run. Not only did they show a robust growth since last year, they are also closing the gap with the pre-Covid levels. They are down by a mere 3% as compared to the pre-Covid levels with a robust year-on-year growth of 59%.
“EV FAME-2 subsidy along with demand from commercial 3W space is fuelling healthy growth. The segment has shown tremendous resilience and has almost clawed back to pre-pandemic levels,” FADA said. It also hopes that the enhanced income tax rebate can accelerate the demand for 2Ws as well as entry-level passenger vehicles (PVs).
The PV segment continues to perform well with a growth of 22% year-on-year. It has also grown 8% from its pre-Covid levels. “While good enquiry, healthy bookings and improved supplies are helping aid this segment, it is the entry level sub-segment which is still feeling the pinch,” said Singhania.
While waiting periods for some models have come down, compact SUVs, SUVs and luxury vehicles continue to witness minimum waiting of 2-3 months.
FADA predicts that with China’s factory activity once again gaining pace, global supplies of parts and semiconductors will see a recovery, thus aiding better vehicle supplies and lower waiting period in future. “This will further fuel growth for the already healthy passenger vehicle category,” the industry body says.
The Commercial Vehicle (CV) category has also shown robust growth by growing 16% year-on-year, and 6% from the pre-Covid month of January 2020. Continued demand in the market due to replacement of fleet, growth in freight availability and government’s consistent push for infrastructure projects has helped the CV segment rise above pre-Covid numbers.
“The capital outlay of ₹10 lakh crore for infrastructure spending will help aid CV sales, which is already witnessing an upswing,” FADA says, adding that reduction in surcharge for highest tax payers could also benefit high-end vehicle sales.
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