Sweet Diwali returns for Indian automobile sector

First strong growth in over four years, but speed bumps ahead

Business

October 25, 2022

/ By / New Delhi

Sweet Diwali returns for Indian automobile sector

Indian automobile sector is on the move again

The Indian automobile sector, from manufacturers to dealers, is finally breathing easier as strong domestic demand for passenger vehicles stages a comeback after almost four years.

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According to the latest data released by the Society of Indian Automobile Manufacturers (SIAM), the industry lobby group, a total of 307,389 passenger vehicles were sold in September, while three-wheeler sales stood at 50,626 units and over 1.73 million two-wheeler were sold in the country in the month.

After almost four years, the automobile sector in India seems to have reached back to cruising speed as sales and production have been consistently increasing since the beginning of this fiscal year, in April. A total of 13.7 million units of automobiles were produced in the country in the period April 1-September 30, says SIAM.

It is not just the production that has been rising strongly this year, but domestic demand, too, seems to have bounced back. While a total of 1.93 million passenger vehicles were sold, commercial vehicle sales totalled over 456,000 units and 2-wheeler and 3-wheeler sales crossed 8.6 million units in the six months.

“There is an improvement seen across the segments in Q2 of 2022-23, compared to the previous year. We are hopeful that the industry will do well in the month of October, which has two major festivals of Dussehra and Diwali. Recent increase in the prices of CNG Fuel, higher repo rates and the Russia-Ukraine conflict are of concern and could impact the market in the coming months,” says Vinod Aggarwal, President of SIAM.

Festive season to accelerate sector further

While the first half of the current fiscal may have been good, things seem to be only getting better and not just for the manufacturers. Automobile dealers across the country are reporting exceptionally strong rush of customers at their showrooms, especially since the beginning of the festive season in September.

According to reports, with the festival season in full swing, automobile dealers expect a huge spike of around 40 pc in car and two-wheeler sales in the run-up to Diwali across the country. Auto dealers say that between Navratri and Diwali, nearly 200,000 passenger vehicles are likely to be sold while around 800,000 units so far have been booked.

According to Federation of Automobile Dealers Associations (FADA), the retail sales segment witnessed 57 pc growth during Navratri festival that ended in early October. This is the strongest growth registered in the  festive season in India since 2018, even if the growth has come on a rather low base due to the battering that the automobile sector has taken over the past four years. FADA President Manish Raj Singhania has been quoted in media reports as saying that dealers are expecting record bookings as customers insisted on deliveries during Dhanteras period.

Despite the growth, the Indian auto sector may not yet be out of the woods completely as SIAM says that sales are yet to pick up in the rural areas.

“September month has been generally good for industry, as passenger vehicle segment has recorded highest ever sales in H1 and commercial vehicle segment has started showing trends of better market demand. Off-take of entry level two-wheelers and entry level passenger vehicles have been of concern especially as the rural demand has not picked up,” adds Rajesh Menon, Director General of SIAM.

Higher inflation and fuel prices, along with poor employment growth, are indeed factors to worry about and if the next harvest, too, is rather grim, it is unlikely that the demand from rural India, the backbone of the national economy, is likely to return strongly any time soon.

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