Vehicle registrations rise by a modest 3 per cent in May

Vehicle registrations – a proxy for retail sales – went up by a modest three percent to 2.09 million units last month with consumers delaying purchases due to election-related uncertainties and extreme heat. Passenger vehicle registrations dipped marginally during the month under review by 0.96% to 303,358 units. As per data collated by industry body Federation of Automobile Dealers Association (FADA), two-wheeler registrations rose 2.48% to 1,534,856 units, three-wheelers by 20.09% to 98,265 units and commercial vehicles by 4.07% to 83,059 units. Registrations of tractors slid by 1.06% to 70,065 units in May.

Dealers are cautiously optimistic of market sentiments improving in the coming months driven by forecast of good monsoons and formation of a stable government. FADA President Manish Raj Singhania said, “Post-election results are expected to bring stability and improve market sentiment, while the formation of a continued government could boost infrastructure projects and economic activities.”

Dealers are hopeful about better supplies and positive movement in key sectors like cement, coal and iron ore. The India Meteorological Department (IMD) has forecast above-normal rains at 106% of the long-period average (LPA) this year, which is expected to enhance rural demand and support economic activities. Though extreme weather conditions, such as heatwaves and heavy rains, along with the reopening of schools in July, might delay purchase decisions, Singhania informed.

In the two-wheeler segment despite supply constraints, lack of marketing activities and impact of the extremely hot weather and elections, rural demand due to expected good monsoon and improved finance availability kept counters ticking.

However, in the passenger vehicle segment, despite better supply, some pending bookings and discount schemes, the lack of new models, intense competition and poor marketing efforts by auto companies affected sales. “Increased customer postponements and low enquiries further contributed to the challenging market conditions. Due to the extreme heat, the number of walk-ins to showrooms dropped by around 18%”, Singhania said. Despite growth on a low base and increased bus orders, commercial vehicle makers too faced challenges on account of negative market sentiment. This was partially offset by good movement in market loads from cement, iron ore, and coal sectors. Overall, auto retails saw mixed results, the industry is navigating through significant challenges, Singhania said , adding stakeholders are cautiously optimistic going ahead. He said, “Despite positive indicators, challenges persist, including intense competition, lack of new model launches and poor marketing efforts by OEMs. Liquidity issues and high inventory levels continue to strain profitability for Dealerships. Although discount schemes and good product availability are in place, low customer enquiries and postponements due to seasonal factors remain concerns.”

Uneven monsoon rains have previously impacted farm sector growth and while this year’s above-normal forecast is promising, he said, it raises the risk of possible floods in some regions, potentially disrupting the market. Overall, Singhania said while there is potential for growth with the new government formation and favourable economic conditions, addressing these challenges will be crucial for sustained improvement in the automotive market.

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