Auto retail sales dip 4% in April on weak rural demand, price rise

Sluggish demand for two-wheelers, especially in rural India, and rise in prices due to the implementation of new emission norms from the beginning of the current fiscal, dragged retail sales of vehicles in the country down by 4 per cent year-on-year to 1.72 million units in April, the industry data showed.

Two-wheeler sales slumped by 7 per cent to 12,29,911 units in April, as against 13,26,773 units in the same month last year, as per data released by the Federation of Automobile Dealers’ Association (FADA). Compared to the pre-Covid April 2019, 2-wheeler sales are still down by 19 per cent.

Retail sales of passenger vehicles declined by 1 per cent to 2,82,674 units in April 2023 from 2,86,539 units recorded in the same month last year. According to companies' data released earlier this week, auto wholesales were largely in the green in April.

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“Although supplies are improving, there is a significant mismatch between customer demand and available inventory,” said FADA President Manish Raj Singhania.

For the first time in eight months the passenger vehicles segment witnessed a year-on-year decline in retail sales.

The key reasons for the decline in sales of passenger vehicles in April were a jump in prices due to the implementation of on-board diagnostics (OBD) 2A norms and last year's high base.

Furthermore, 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 Singhania.

The commercial vehicles segment maintained positive momentum with a 2 per cent YoY increase in retail sales. However, dealers reported that vehicle availability was a major concern due to the OBD 2A norms. The low base from last year also contributed to the positive growth.

Expressing concern over the sharp-decline in two-wheeler sales, the dealers’ association urged the GST Council to consider reducing the GST on two-wheelers from 28 per cent to 18 per cent. Two-wheelers segment represents 75 per cent of total auto sales volume in India.

On the near-term outlook, FADA noted: “unfavourable weather conditions persist in May, including untimely rains and hailstorms, causing crop damage in multiple states. This exacerbates concerns for farmers and may potentially impact entry-level 2-wheeler and passenger car sales.”