Cautious optimism for automobile retail sector in February FADA

The February outlook for the automobile industry leans toward cautious optimism with growth potential, said the Federation of Automobile Dealers Associations (FADA). According to FADA, though last month the industry logged good growth, there are challenges and market complexities as regards the prospects for the current month.

The FADA said the anticipation of upcoming elections may make customers cautious which may affect the purchasing decisions across the vehicle segments. That apart, there are constraints on the vehicle supply, finance and liquidity sides.

Persistent supply bottlenecks for specific high-demand models present a risk factor for consistent growth across two-wheeler, commercial vehicle and passenger vehicle segments, highlighting the need for OEM optimization of production lines, FADA said on Tuesday.

'Fluctuating market liquidity and the potential for tighter financing in the CV (commercial vehicle) sector require a focus on consumer financing solutions to support overall sales. On an overall basis, the Industry Outlook leans towards cautious optimism but shows growth potential in the near term," FADA added.

However, the year 2024 began on a good note for the automobile industry with all the segments -barring the CV segment logging promising growth.

Commenting on the last month's auto retails, FADA President, Manish Raj Singhania said: "January 2024 began on a promising note for the calendar year, demonstrating 15 per cent overall retail growth compared to the previous year. All vehicle categories - 2W (two wheeler), 3W (three wheeler), PV (passenger vehicle), Tractors, and CV – achieved positive YoY growth of 15 per cen, 37 per cent, 13 per cent, 21 per cent, and 0.1 per cent respectively.”

According to Singhania, two and three-wheeler segments show a shifting trend towards the electric vehicles.

"The 3W sector revealed a mixed landscape. While growth and optimism continue within the commercial 3W market, intensified competition from electric models underscores a significant market shift – now 55 per cent electrified," Singhania said.

It was a complex scenario for the CV segment last month with limited YoY growth.

"On one hand, increased infrastructure development, port activity and positive crop yields fuelled certain market segments. However, this momentum was hindered by extreme weather, tightened liquidity, high vehicle costs and more restricted financing," he said.

The passenger vehicle segment logged retail sales of 3,93,250 units last month owing to the introduction of new models, wedding season, effective marketing and others.

"However, despite this achievement, serious concerns remain regarding PV inventory levels, now in the 50-55 day range. This calls for immediate recalibration of production from OEMs to better align with actual market demand and avoid future oversupply issues. As adaptability is crucial in this dynamic industry, OEMs must balance innovation with strategic production planning to ensure sustained success and overall market stability," Singhania said.