In a noteworthy achievement for the Indian Auto Retail Industry, November 2023 marked a historic moment with the sale of 28.54 lakh vehicles, surpassing the previous highs set in March 2020 during the transition from BS-4 to BS-6 emission norms. This significant milestone was accompanied by remarkable performances in various vehicle categories, ushering in optimism amid the industry.

The month of November 2023 witnessed a year-on-year (YoY) growth of 18% and a substantial month-on-month (MoM) growth of 35%. Two-wheelers and Passenger Vehicles (PV) emerged as the frontrunners, setting new all-time highs. Two-wheelers recorded sales of 22.47 lakh vehicles, surpassing the previous high of March 2020 at 20.7 lakh vehicles. Concurrently, PV sales reached 3.6 lakh vehicles, exceeding October 2022 figures of 3.57 lakh vehicles.

The stellar growth in the two-wheeler category, particularly during festive seasons, contributed significantly to the overall industry growth, witnessing a remarkable 49% MoM increase. Passenger Vehicles, growing by 2%, played its part, collectively propelling the industry to a noteworthy 35% MoM growth.

Category-wise Growth Analysis

Breaking down the growth figures, two-wheelers, three-wheelers and PV exhibited YoY growth of 21%, 23% and 17%, respectively. However, Tractors and Commercial Vehicles faced challenges, experiencing a decline of 21% and 2% YoY.

Despite the positive strides, the release raised concerns about high PV inventory levels, persisting above 60 days. Although there was a slight reduction, the Federation of Automobile Dealers Associations (FADA) urged PV Original Equipment Manufacturers (OEMs) to curtail dispatches of slow-moving vehicles, advocating for attractive year-end schemes to spur buying and alleviate inventory concerns at dealerships.

External Factors and Near-Term Outlook

External factors, including severe rains and hailstorms in west and south India, pose potential threats to rabi crop cultivation, potentially impacting crop output and driving inflation. Such economic implications may affect daily essentials, influencing vehicle sales in the near term.

Manish Raj Singhania, President of FADA, acknowledged the historic significance of November 2023, emphasizing the industry's resilience and the setting of new records by the 2W and PV categories. While near-term opportunities exist, challenges such as weather-related impacts on rural incomes may dampen sales.

Near-Term Outlook and Industry Dynamics

In the near term, the two-wheeler category anticipates a boost from liquidity infusion, especially in agricultural regions and the ongoing marriage season. Approximately 38 lakh marriages are expected to stimulate vehicle sales. However, challenges loom as adverse weather conditions may impact rural incomes.

Commercial Vehicles (CVs) foresee a potential recovery, fuelled by renewed business activities post-elections and positive developments in sectors like cement and coal. Order backlogs and increasing business activities contribute to a positive sales outlook for CVs.

The PV sector, with potential growth avenues, anticipates a surge in sales driven by year-end offers, discounts, improved vehicle supply, and new product launches. However, challenges such as a preference for 2024 manufactured vehicles and a slowdown in demand post-festivities need strategic attention. The persistently high PV inventory reinforces the strategic importance of OEMs reducing dispatches of slow-moving vehicles.

Navigating Through Challenges

While the industry celebrates achievements and anticipates growth opportunities, navigating through the complex landscape of consumer preferences, high PV inventory, and external economic factors remains crucial. The sector must strategize to address challenges and capitalize on potential opportunities presented by new product launches and seasonal demands. The need for strategic inventory management and attention to economic factors, including potential inflation impacts, will shape the near-term trajectory of the Indian Auto Retail landscape.

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