Sales of passenger vehicles slowed down in April as demand tapered off due to the on-board diagnostics (OBD 2A) norms which led to a hike in vehicle prices, prompting customers to advance purchases in March.

The passenger vehicle (PV) segment witnessed a year-on-year degrowth for the first time in eight months led by last year's high base, says the Federation of Automobile Dealers Associations of India (FADA).

The auto dealers' lobby says that entry-level PVs have fewer buyers, suggesting that customers at the bottom of the pyramid are still hesitant to upgrade from two-wheelers to four-wheelers.

Although supplies are improving, there is a significant mismatch between customer demand and available inventory, the dealers' body says.

April witnessed a 4% decline in total vehicle retails, signalling a slow start to the financial year 2023-24.

"Financial year 2024 began on a subdued note, with the month of April experiencing a 4% YoY overall decline. Although the 3-wheeler segment enjoyed robust growth of 57% YoY, tractor and CV segments only grew by a modest 1% and 2%, respectively. Meanwhile, the 2-wheeler and passenger vehicle categories experienced YoY degrowth of 7% and 1%, respectively," says FADA President Manish Raj Singhania.

Two-wheeler sales fell 7% year-on-year owing to limited supplies due to the OBD 2A shift, untimely rains, and pre-buying in March, says Singhania.

"Model mix availability, rural sentiment, and demand in the 2-wheeler motorcycle segment remain weak. The rural economy has yet to show significant progress. Compared to the pre-Covid April 2019, 2-wheeler sales are still down by 19%," he says.

The commercial vehicle (CV) segment maintained positive momentum with a 2% year-on-year increase in retail sales. "However, dealers reported that vehicle availability was a major concern due to the OBD 2A norms. The low base from last year also contributed to the positive growth," says Singhania.

In its near-term outlook, FADA says the two-wheeler segment continues to face challenges, with entry-level vehicles attracting fewer buyers. The lobby urged the GST Council to consider reducing GST on two-wheelers from 28% to 18% to help revive this segment, which represents 75% of total auto sales volume.

Unfavourable weather conditions in May, including untimely rains and hailstorms, caused crop damage in multiple states. FADA warns that this exacerbates concerns for farmers and may potentially impact entry-level two-wheeler and passenger car sales.

FADA, however, says the upcoming marriage season in May is expected to bring about a sales resurgence, driven by an increase in customer inquiries.

As electric vehicles (EVs) gain popularity, customers are increasingly considering transitioning from internal combustion engines (ICE) to EVs, which may temporarily delay purchasing decisions, the dealers' body says.

In the passenger vehicle segment, rising inventory levels are raising concerns, says FADA. It urged original equipment manufacturers (OEMs) to recalibrate their inventory and prioritise the production and supply of products that are in high demand, ensuring an efficient alignment between market demand and available inventory.

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