Informist, Tuesday, Apr 9, 2024
--FADA head: See FY25 passenger car sales growth in low single digit
--CONTEXT: India's passenger car sales grew 8% in FY24
--FADA head: See 2-wheeler sales up in high single digit in FY25
--CONTEXT: India's two-wheeler retail sales grew 9% in FY24
--CONTEXT: FADA head Singhania's comments in interview to Informist
--FADA head: See FY25 tractor sales up in mid-single digit vs 8% FY24
--FADA head: See FY25 CV sales up in mid-single digit vs 5% FY24
By Darshan Nakhwa
MUMBAI – Growth in India's passenger vehicle sales is expected to slow down to a low single digit in 2024-25 (Apr-Mar) from nearly 8% the previous financial year, Manish Raj Singhania, president of the Federation of Automobile Dealers Associations, told Informist in an interview. However, sales may be better if rainfall is sufficient, borrowing costs fall, and demand picks up after the General Elections, he said.
By comparison, sales of two-wheelers, commercial vehicles, and tractors are seen growing at more or less the same pace as in 2023-24, he said.
"The passenger vehicle segment is starting next (new) financial year on a high note and surpassing any kind of peak is always difficult," Singhania said. In the year ended Mar 31, car sales rose to an all-time high of 3.95 mln units. The growth was driven by several factors. First, the availability of cars improved as the industry overcame the supply chain disruptions caused by the COVID-19 pandemic. Second, strong demand for sport utility vehicles helped offset the weak demand for small cars; in fact, sport utility vehicles accounted for half the passenger vehicle sales in 2023-24. Lastly, new launches and improved road infrastructure helped boost demand.
In the current financial year, the introduction of new electric vehicles is expected to boost demand for passenger vehicles. India's top four automakers--Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Mahindra & Mahindra Ltd--which have a combined market share of 80%, are expected to introduce at least one electric vehicle each during the year.
"There is a lot of excitement in terms of new model launches. Though the electric vehicle penetration is still very low at around 2.5% (of total passenger vehicle sales), the excitement is there," Singhania said. "Currently, customers are buying electric passenger vehicles out of passion, not out of necessity. This is in spite of the electric vehicle being expensive compared to an internal combustion engine option."
Electric vehicle penetration in India is expected to increase as battery prices, which account for nearly half the vehicle cost, come down as new production capacity gets added across the world and mining of precious minerals needed for batteries becomes more efficient, he said.
BUMPY ROAD
FADA expects the Reserve Bank of India's decision to keep the benchmark repo rate unchanged at 6.5% to negatively affect retail sales of all vehicles in the near term, especially sales of entry-level vehicles, as buyers in this segment are extremely price-sensitive. The entry-level passenger vehicle segment is already struggling and needs support, Singhania said. High interest rates are a dampener for sales as most first-time vehicle purchases are funded by loans.
On Friday, the RBI's Monetary Policy Committee left the repo rate unchanged for the seventh consecutive time since the rate-tightening cycle began in May 2022. The RBI has raised the benchmark rate by 250 basis points since May 2022.
The Lok Sabha elections are also likely to affect demand for most vehicle sales, Singhania said. "We saw a dip in sales of passenger and commercial vehicles during the last Vidhan Sabha elections in large states - Chattisgarh, Madhya Pradesh and Rajasthan - because of restrictions on carrying cash. But immediately after the election, we saw a huge spike in retail sales," he said.
The trend is likely to be repeated during the Lok Sabha elections, to be held in April and May, Singhania said. Consumers who want to pay in cash are expected to defer their purchases for a short term, but sales are likely to spike post elections.
Sales of two-wheelers, which account for around 70% of vehicle sales, are expected to grow by high single digits in 2024-25, almost the same as the 9% growth clocked in 2023-24. However, there is a chance these sales may grow by double digits if government spending increases after the elections and if the monsoon is better than last year, according to Singhania.
As per initial predictions, rainfall is expected to be above average this year, with the El Nino effect tapering off. The combination of better crop output and higher minimum support prices by the government is expected to boost rural demand, which in turn is likely to drive two-wheeler sales, Singhania said. In India, most two-wheelers are sold in rural areas.
In 2023-24, two-wheeler sales rose slightly over 9% to 17.51 mln units, driven by strong demand for premium models and electric vehicles, as also new launches, according to FADA. However, sales of two-wheelers are yet to cross their 2018-19 record of 21 mln units. Over the last few years, prices of two-wheelers have shot up sharply owing to an increase in raw material costs and as manufacturers have had to comply with new emission norms.
The two-wheeler segment has had a mixed growth trajectory over the last few years. While sales in the segment in 2020-21 were nearly 32% lower than in the previous year on account of the COVID-19 pandemic, sales saw a slight improvement of around 4% in 2021-22. In 2022-23, sales surged nearly 19%, but were still the lowest in the last seven years, according to the association.
Singhania said tractor and commercial vehicle sales are expected to grow by mid-single digit in 2024-25. Commercial vehicle sales will depend on government spending after the election, he said. Demand for commercial vehicles is expected to be muted in the first half of the year due to elections, but is likely to pick up in the second half as government spending resumes, he said.
In the year-ended Mar 31, commercial vehicle sales rose nearly 5% to 1.01 mln units, but the sales growth moderated after an upswing of nearly 33% in 2022-23. After the industry transitioned to the second phase of the Bharat Stage-6 emission norms in April 2023, prices of commercial vehicles rose by mid-single digits, which slightly affected demand.
Tractor sales rose 8% on year to 892,313 units in 2023-24, far better than expected. At the beginning of 2023-24, a lot of manufacturers were sceptical about closing the year on a positive note due to the El Nino weather phenomenon, Singhania said. Tractor sales have surged as the COVID-19 pandemic-induced migration has boosted demand not only for agriculture but also for transport and for carrying construction material, Singhania said. End
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
Informist, Tuesday, Apr 9, 2024
--FADA head: See FY25 passenger car sales growth in low single digit
--CONTEXT: India's passenger car sales grew 8% in FY24
--FADA head: See 2-wheeler sales up in high single digit in FY25
--CONTEXT: India's two-wheeler retail sales grew 9% in FY24
--CONTEXT: FADA head Singhania's comments in interview to Informist
--FADA head: See FY25 tractor sales up in mid-single digit vs 8% FY24
--FADA head: See FY25 CV sales up in mid-single digit vs 5% FY24
By Darshan Nakhwa
MUMBAI – Growth in India's passenger vehicle sales is expected to slow down to a low single digit in 2024-25 (Apr-Mar) from nearly 8% the previous financial year, Manish Raj Singhania, president of the Federation of Automobile Dealers Associations, told Informist in an interview. However, sales may be better if rainfall is sufficient, borrowing costs fall, and demand picks up after the General Elections, he said.
By comparison, sales of two-wheelers, commercial vehicles, and tractors are seen growing at more or less the same pace as in 2023-24, he said.
"The passenger vehicle segment is starting next (new) financial year on a high note and surpassing any kind of peak is always difficult," Singhania said. In the year ended Mar 31, car sales rose to an all-time high of 3.95 mln units. The growth was driven by several factors. First, the availability of cars improved as the industry overcame the supply chain disruptions caused by the COVID-19 pandemic. Second, strong demand for sport utility vehicles helped offset the weak demand for small cars; in fact, sport utility vehicles accounted for half the passenger vehicle sales in 2023-24. Lastly, new launches and improved road infrastructure helped boost demand.
In the current financial year, the introduction of new electric vehicles is expected to boost demand for passenger vehicles. India's top four automakers--Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Mahindra & Mahindra Ltd--which have a combined market share of 80%, are expected to introduce at least one electric vehicle each during the year.
"There is a lot of excitement in terms of new model launches. Though the electric vehicle penetration is still very low at around 2.5% (of total passenger vehicle sales), the excitement is there," Singhania said. "Currently, customers are buying electric passenger vehicles out of passion, not out of necessity. This is in spite of the electric vehicle being expensive compared to an internal combustion engine option."
Electric vehicle penetration in India is expected to increase as battery prices, which account for nearly half the vehicle cost, come down as new production capacity gets added across the world and mining of precious minerals needed for batteries becomes more efficient, he said.
BUMPY ROAD
FADA expects the Reserve Bank of India's decision to keep the benchmark repo rate unchanged at 6.5% to negatively affect retail sales of all vehicles in the near term, especially sales of entry-level vehicles, as buyers in this segment are extremely price-sensitive. The entry-level passenger vehicle segment is already struggling and needs support, Singhania said. High interest rates are a dampener for sales as most first-time vehicle purchases are funded by loans.
On Friday, the RBI's Monetary Policy Committee left the repo rate unchanged for the seventh consecutive time since the rate-tightening cycle began in May 2022. The RBI has raised the benchmark rate by 250 basis points since May 2022.
The Lok Sabha elections are also likely to affect demand for most vehicle sales, Singhania said. "We saw a dip in sales of passenger and commercial vehicles during the last Vidhan Sabha elections in large states - Chattisgarh, Madhya Pradesh and Rajasthan - because of restrictions on carrying cash. But immediately after the election, we saw a huge spike in retail sales," he said.
The trend is likely to be repeated during the Lok Sabha elections, to be held in April and May, Singhania said. Consumers who want to pay in cash are expected to defer their purchases for a short term, but sales are likely to spike post elections.
Sales of two-wheelers, which account for around 70% of vehicle sales, are expected to grow by high single digits in 2024-25, almost the same as the 9% growth clocked in 2023-24. However, there is a chance these sales may grow by double digits if government spending increases after the elections and if the monsoon is better than last year, according to Singhania.
As per initial predictions, rainfall is expected to be above average this year, with the El Nino effect tapering off. The combination of better crop output and higher minimum support prices by the government is expected to boost rural demand, which in turn is likely to drive two-wheeler sales, Singhania said. In India, most two-wheelers are sold in rural areas.
In 2023-24, two-wheeler sales rose slightly over 9% to 17.51 mln units, driven by strong demand for premium models and electric vehicles, as also new launches, according to FADA. However, sales of two-wheelers are yet to cross their 2018-19 record of 21 mln units. Over the last few years, prices of two-wheelers have shot up sharply owing to an increase in raw material costs and as manufacturers have had to comply with new emission norms.
The two-wheeler segment has had a mixed growth trajectory over the last few years. While sales in the segment in 2020-21 were nearly 32% lower than in the previous year on account of the COVID-19 pandemic, sales saw a slight improvement of around 4% in 2021-22. In 2022-23, sales surged nearly 19%, but were still the lowest in the last seven years, according to the association.
Singhania said tractor and commercial vehicle sales are expected to grow by mid-single digit in 2024-25. Commercial vehicle sales will depend on government spending after the election, he said. Demand for commercial vehicles is expected to be muted in the first half of the year due to elections, but is likely to pick up in the second half as government spending resumes, he said.
In the year-ended Mar 31, commercial vehicle sales rose nearly 5% to 1.01 mln units, but the sales growth moderated after an upswing of nearly 33% in 2022-23. After the industry transitioned to the second phase of the Bharat Stage-6 emission norms in April 2023, prices of commercial vehicles rose by mid-single digits, which slightly affected demand.
Tractor sales rose 8% on year to 892,313 units in 2023-24, far better than expected. At the beginning of 2023-24, a lot of manufacturers were sceptical about closing the year on a positive note due to the El Nino weather phenomenon, Singhania said. Tractor sales have surged as the COVID-19 pandemic-induced migration has boosted demand not only for agriculture but also for transport and for carrying construction material, Singhania said. End
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.