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Vehicle registrations increase by 13% to two million units in February, according to FADA

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Vehicle registrations – a proxy for retail sales – increased in healthy double-digits by 13% to over two million units last month amid better supplies and sustained consumer demand across rural and urban markets.

As many as 2,029,541 vehicles were sold last month, which is an increase of 13% over 1,794,866 units sold in February 2022, as per data collated by FADA (Federation of Automobile Dealers Association).

FADA President Manish Raj Singhania said vehicle retails increased across categories. While sales of two-wheelers went up by 13.25% to 1,439,523 units in the month under consideration, those of three-wheelers rose 23.88% to 94,918 units. “The 2W market’s 13% YoY growth was driven by the rural sector, premium model demand, and strong entry-level segment performance, with broader product availability and compelling offers enhancing product acceptance. Factors like favourable marriage dates and improved economic conditions also contributed to this positive growth”, Singhania informed.

In the passenger vehicle segment too, sales grew by 12.36% to 330,107 units last month – a record for the month of February. However, high inventory levels ranging between 50-55 days remains a cause of concern for retailers. Singhania said the growth in sales in the passenger vehicle segment was driven by the strategic introduction of new products and enhanced vehicle availability. “While the sector benefits from favourable customer sentiment and the successful introduction of models in high demand, the persistently elevated inventory levels, remaining at 50-55 days, present a significant concern”, he said.

Singhania added it is imperative that PV OEMs undertake adjustments in production to mitigate these high inventory levels, thereby reducing the financial burden of carrying costs on dealers as it is vital for maintaining the financial health of dealers.

Meanwhile, sales of commercial vehicles increased by 4.78% to 88,367 units in February, on back of fleet purchases, sales of school buses, strong sectoral demand and improved financing, despite obstacles like cash flow shortages and election-related purchase deferrals. Near-term, the revival in rural consumption, along with increased demand for premium and entry-level segments, are set to support sales of two-wheelers. Demand for three-wheelers and commercial vehicles too are expected to remain strong driven by year-end rush and an infusion of funds into the market. In the passenger vehicle segment, promotional offers, improved availability of vehicles and seasonal factors such as marriages is likely to propel demand.“However, the anticipation of elections casts a shadow over this positive scenario, with potential deferred purchases across segments. The commercial vehicle sector, in particular, might face a cautious approach from customers waiting for the outcome of general elections”, Singhania said.

In the PV segment, the availability of popular variants too remain a concern. External factors like crop failures in rural areas could also dampen market sentiment and financial liquidity pose additional hurdles to sustained growth.

Overall, the near-term outlook for March 2024 in the auto retail sector is one of cautious optimism, Singhania said.

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