May auto sales rise 10% but still below pre-Covid level with challenges in store

• Latest data released by FADA shows that EVs now account for 8% of total auto sales.
  
• The ride ahead won’t be smooth due to inventory issues, regulatory norms and other headwinds.
  
• Challenges will differ for each sub-sector, adds the report.
  

The May heat did not deter auto sales much as sales rose an impressive 10% compared to a year ago. However, the industry which has struggled since the Covid -19 hit, isn’t out of the woods yet, as per industry body Federation of Automobile Dealers Associations (FADA). For starters, the reading is still below the pre-pandemic level.

“While there has been a slight 2% decline compared to pre-Covid levels, the overall retail figures have shown improvement. The two-wheeler and commercial vehicles (CV) sales did continue to face some challenges, recording high-single-digit setbacks of 8% and 7% respectively,” said Manish Raj Singhania, president of FADA.

Each sub-sector, be it two-wheelers or passenger vehicles, is expected to face a different set of challenges. Two-wheeler sales picked up in May as they grew 9% year-on-year, thanks to the wedding season and recovery in rural demand. Added to that, the changes in FAME which have taken effect from this month, also prompted higher electric 2-wheeler sales in May.

The phase II of Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) scheme commenced in 2019 for a period of three years, and extended till March 2024. The Heavy Industries Ministry notified in late May that it has reduced the subsidy provided under the scheme to electric two wheelers. After FAME subsidies were slashed, players like TVS, Ather and Ola increased prices.

Though seasonal factors could boost demand for two wheelers in general, there will be concerns like weather-induced walk-in reductions, inventory, and regulatory norms, said FADA.

Inventory worries

Passenger vehicle sales grew 4% in May year-on-year, recovering from a slump seen in April. “Improved availability of vehicles, the strength of pending orders, and the robust demand for new launches drove a positive momentum,” said Singhania.

Going ahead, the industry body expects the PV sector to see increased demand, particularly for new models, compact and full-sized sports utility vehicles (SUVs) and electric vehicles (EVs). But inventory pressure and right model availability could pose challenges, it added.

Three wheelers are maintaining their good run as their sales went up by 79%, while tractor sales also went up almost 10% in May, compared to last year.

Commercial vehicle sales also grew 7%. The commercial vehicle segment experienced sustained growth, underpinned by the government's focus on infrastructure development. The bus segment displayed a notable increase, driven by improved financing options and higher sales in academic institutions, FADA said.

Going forward, however, the CV sector anticipates improved vehicle availability but concerns about real driver emission (RDE) norms and seasonal effects may impact sales.

Vehicle retail sales in May


Source: FADA

EV sales power up

The sales of EVs registered an impressive show in May, and accounted for 8% of total vehicle retail. A surge in two-wheeler sales is also one of the reasons, as 7% of total sales in this category were EVs.

The best EV show, however, was from three wheelers as it accounted for 56% of total sales in this category. The CV and PV categories also marked their presence in the EV landscape, with respective contributions of 0.5% and 2.5%, FADA said.

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