Floods in June-July and then the driest August over the past one decade. Monsoon this year has been erratic, patchy, uneven and unpredictable. The El Nino factor took hold of Indian monsoons in August and on the whole, there is nearly 10-12% rainfall deficiency in 2023. With this backdrop, auto retail volume growth over the past four months has been resilient. Auto retail grew 8.6% YoY in August 2023. While the auto retail volumes were marginally lower than previous July 2023 figures, there was consistent uptick across multiple vehicle categories in August 2023.
The three-wheeler category took the top spot yet again, with YoY growth at 66% in August 2023, followed by tractors rising 14% YoY, passenger vehicles (PV) 6.5% YoY and two-wheelers jumped 6.3% YoY.
Electric three-wheelers vroom, two-wheelers glide in August 2023
The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme outlined Rs 10,000 crore budgetary support for its Phase-II for a period of five years commencing from 1st April, 2019 to 31st March, 2024. Strong government drive has led to electric vehicles (EV) finding the required foothold in the two-wheeler, PV and especially three wheelers sector. Currently more than 50% of three wheelers sold in India are electric. Electric three-wheeler retail growth came in at 58% YoY and 114% YoY for passenger and goods category respectively in August 2023. The budgetary allocation for FAME III is expected to increase 4-5 times compared to FAME II and the electric drive for the auto sector is here to stay for a long time. Presently, electric vehicles constitute 2-3% of total auto sales in India.
Two-wheelers are also moving well on the electric highway. EVs constitute nearly 3% of total sales in the two-wheeler market in India. Ola Electric is the market leader in the electric two-wheeler market in India with a market share of about 30%. Ola Electric retail volume sales grew five times YoY in August 2023.
While Hero MotoCorp and Honda reported flat YoY growth, TVS Motors, Bajaj Auto, Royal Enfield and Suzuki Motorcycle reported double-digit YoY retail sales growth in August 2023. On the whole the two-wheeler segment grew 6% YoY supported by rural volume growth and electric two-wheeler category. The government’s subsidy reduction from Rs 15,000 kWh to Rs 10,000 kWh under FAME II scheme in June 2023, did not have any negative impact on the electric two wheeler segment. However, insufficient rainfall could temper sales growth in the coming months in rural India.
CVs Register lackluster growth, Tractors and Passenger Vehicles Look Resilient
Commercial vehicles (CV) continued on their low single-digit retail growth path. CVs retail volumes grew 3% both YoY and sequentially in August 2023. Low retail growth was mainly due to lower demand for light commercial vehicles (LCV) which constitutes nearly 60% of total CV volumes. According to FADA, sales momentum is anticipated to pick up during the Navratri and Deepawali festival following the shraadh period.
Tractors retail sales look resilient on YoY basis rising by 13.6%, but dipped sequentially by 18.6% in August 2023. Low tractor sales were mainly due to deficient rainfall in August. Kharif crops sown in June-July period and harvested in the months of October-November are extremely crucial for rural India. Insufficient rainfall could lead to rise in inflation, adversely affecting consumer purchasing power and diminishing demand in the auto sector, especially tractors. And this coincides with the peak of the festive season, Navratri and Deepawali, traditionally periods of heightened consumer activity. With this backdrop, FADA has adopted a cautious stance for the whole auto sector in the upcoming festive season.
And lastly PV segment retail sales driven by SUV vehicles jumped 6% YoY in August 2023. SUV and UVs are ruling the India PV segment. SUVs currently account for nearly 30-35% of the Indian PV sector. Maruti Suzuki and Mahindra & Mahindra’s double-digit retail volume growth is supported by the SUV segment. In August 2023, Maruti Suzuki SUV and UV wholesales jumped 118% YoY with overall wholesale volume increase of just 14% YoY. Similarly for M&M, UV wholesales increased 26% YoY in August 2023 with total PV wholesalers rising by 25% YoY.
