Retail Auto Sales Fall In December As Two-Wheelers Remain A Drag

India’s automobile sales at dealerships slowed in December, after a festive boost to sales in the last two months, as weak demand for two-wheelers pulled down the total tally.

Total sales fell 5.4% to 16.22 lakh units in the month, according to the Federation of Automobile Dealers Associations. The sales were 21% and 12% lower than corresponding months in 2020 and 2019, respectively.

"The month of December went into a lull after two super months of October and November, which witnessed an adrenaline rush in the entire auto industry," Manish Raj Singhania, president at FADA, said in a statement. "While all other categories were in the green, it was the two-wheeler segment that once again dragged total sales down by 11%."

Following a spike in sales in October and November due to festive and wedding season demand, two-wheeler sales fell again in December, casting doubt on the segment's claimed demand recovery. 

The two-wheeler sales rose 13.4% year-on-year in 2022 but remained 15.5% lower than the sales in the pre-Covid year of 2019.

A rise in inflation that increased the cost of ownership, muted demand in rural markets, and increased EV sales are the reasons that conventional two-wheelers have yet to see any green shoots, according to the dealers’ association.

Passenger vehicle sales increased 8.2% to 2.8 lakh units as supply woes decreased the year-end discount at dealerships and attracted buyers.

In fact, passenger vehicles and tractors are the only two segments with sales in 2022, growing well above those in 2021, 2020, and 2019.

• Sales of passenger vehicles rose 8.15% to 2.80 lakh units

• Two-wheeler sales fell 11% to 11.33 lakh units

• Sales of three-wheelers jumped 41.5% to 63,655 units

• Tractor sales rose 5.2% to 78,563 units

• Commercial vehicle sales rose 10.7% to 66,945 units

Clocking new lifetime high sales of nearly 8 lakh units in 2022, the tractor segment was supported by a consistently good monsoon, improved cashflow with farmers, a better MSP for crops, timely sowing of rabi crops, and the government’s focus on better procurements, according to FADA.

"Festive season sales, which were normal after three years, also played a part in this strong momentum," Singhania said.

In the commercial vehicle category, sales have continued their strong momentum and are now almost on par with pre-Covid sales. The sales in 2022 were just 1.8% lower than those in 2019, while the year-on-year growth was 32%.

FADA believes the global geopolitical headwinds, tightening monetary policy and the lingering effect of the pandemic has combined to create a gloomy global outlook.

The 225 bps rise in repo rate since May last year and anticipated price hikes due to the latest emission norms may also pose challenges, it said.

Due to these reasons, the association remains cautious during the last quarter of the current fiscal.