Federation of Auto Dealers Association (FADA) released strong auto retail numbers in all five auto segments for February 2023. Manish Raj Singhania, FADA President, said, “February 23 continued to witness double digit growth of 16% YoY but was still down by 8%, when compared to pre-covid month of February 20”. All auto segments reported strong double retail volume sales growth supported by wedding season, change in onboard diagnostics (OBD) norms from April 2023 and government spending on infrastructure.
Three Wheelers reported 81% YoY growth in February 2023 driven by E-rickshaw(passenger) and three wheelers (passenger) sales by more than 80% YoY. Three-wheelers retail volume sales grew 3% when compared to pre-Covid month of February 20. Three-wheeler category is witnessing robust growth driven by the Central & State Government’s subsidy on electric vehicles (EVs). Along with subsidies in FAME II policy outlined by the central government, state governments incentives are also aiding the electric vehicle (EV) sector. Apart from Karnataka, Gujrat, Tamil Nadu, Maharashtra and Telangana, Uttar Pradesh has recently announced a very attractive EV policy.
Commercial vehicles reported 17.3% YoY growth in February 2023 supported by strong government infrastructure spending and change in OBD norms. The second phase of BSVI OBD norms will be applicable from April 1st, 2023. Auto sector witnessed strong growth in the January-February 2023 period and the momentum is expected to continue in March 2023. To avoid higher cost of ownership, customers are buying vehicles before April 2023. OBD norms and wedding season supported two-wheeler sales which rose 15% YoY in February 2023. But the two-wheeler segment which constitutes nearly 70% of auto retail sales volumes is still below pre-pandemic February 2020 levels by 14%.
The Passenger Vehicle segment growth was at 11% YoY and 16% when compared to pre-covid month of February 20. Launch of new models by original equipment manufacturers (OEMs) and wedding season supported growth. March 2023 is expected to log strong and stable auto retail sales numbers driven by OBD norms and Holi and Navratri festivals. Urban demand recovery is better than rural demand. While rural recovery is eagerly awaited, the El Nino conditions in the Pacific could lead to weak monsoons for India. The Indian rural economy dependent on monsoons would be further impacted by weak monsoons already reeling under inflation and poor consumer sentiment. The auto sector might face demand headwinds from FY24 as OBD norms come into play and monsoons play spoilsport.
