The retail performance of vehicles in April marks a slow start to FY2024, with a 4% decline in total vehicle retails. Two-wheelers and passenger vehicles led the declines, according to data released by Federation of Automobile Dealers Associations of India.
Despite a healthy year-on-year (Y-o-Y) growth of 57% in 3-wheelers and marginal growth of 1% and 2% in tractor and commercial vehicles respectively, 2-wheelers faced a setback, declining by 7%.
In April, the passenger vehicle (PV) segment experienced a slowdown with a 1% Y-o-Y decline in retail sales, after achieving record sales in FY 2023. The decline was attributed to a high base from the previous year and the implementation of OBD 2A norms, which caused an increase in vehicle prices and prompted advanced purchases in March.
OBD 2A refers to on-board diagnostics 2nd generation type A, which is a set of regulations implemented by the Indian government to reduce vehicular pollution.
“Entry-level PVs have fewer buyers, suggesting that customers at the bottom of the pyramid are still hesitant to upgrade from 2-wheelers to 4-wheelers,” said Manish Raj Singhania, president, FADA.
2-wheeler segment continues to struggle
The 2-wheeler segment continues to struggle, down by 19% compared to pre-Covid April 2019, and contributing to a 12% decline in total vehicle sales. Unfavourable weather conditions, including untimely rains and hailstorms, caused crop damage in several states in April, aggravating farmer concerns and potentially impacting entry-level 2-wheeler and passenger car sales.
“The 2-wheeler segment’s continued low sales, with a 7% YoY decrease, can be attributed to limited supplies due to the OBD 2A shift, untimely rains, and pre-buying in March. Model mix availability, rural sentiment, and demand in the 2-wheeler motorcycle segment remain weak. The rural economy has yet to show significant progress,” said Singhania.
Inclement weather conditions likely to impact May sales
The 2-wheeler industry is facing challenges as the demand for entry-level vehicles decreases. FADA said it has requested the GST Council to consider reducing the GST on 2-wheelers from 28% to 18% to revive this important segment, which makes up 75% of total auto sales.
However, there is hope that the upcoming wedding season in May will lead to a sales resurgence due to increased customer interest. Additionally, as electric vehicles (EVs) become more popular, customers are considering switching from internal combustion engines (ICE) to EVs, which may delay their purchasing decisions temporarily, FADA said.
