Rain or shine, too much of anything can be a woe, as India’s auto industry has realised. Sales have plummeted due to the extreme summer heat in most parts of the country last month. While good auto sales are a usual offshoot of a good monsoon and its subsequent positives on the agriculture-dependent rural economy, there are worries that too much rain could be a dampener.
The severe heat wave and the long drawn-out elections saw walk-ins at vehicle retail showrooms across the country drop by 18% last month. "Extreme heat and above-normal rains forecast could further impact sales and walk-ins," warned a note released Monday morning by the Federation of Automobile Dealers Associations (FADA).
Blame it on heat or elections or economic misery in the rural hinterland, the fact is that auto industry sales have fallen in most categories in May — passenger cars by 1%, tractors by 1% compared to May last year, while the drop was 6.6% for two-wheelers and 8% for commercial vehicles compared to the previous month (both did register a year-on-year growth, though).
"Despite growth due to a low base from last year and increased bus orders, the industry faced challenges from wholesale pressures, government policy effects, and negative market sentiment,” said FADA president Manish Raj Singhania, adding that "despite better supply, some pending bookings and discount schemes, the lack of new models, intense competition and poor marketing efforts by OEMs also affected sales."
Additionally, increased customer postponements and low enquiries further contributed to the challenging market conditions. Overall, the industry achieved a modest growth of just above 2% in May 2024.
The near-term outlook for car and bike sales is 'cautiously optimistic', influenced by a mix of positive and challenging factors across various segments. Formation of a continued government could boost infrastructure projects and economic activities, according to FADA. 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%, which is expected to enhance rural demand and support economic activities. But too much or uneven rains may not be a good thing, as it can lead to floods in some regions and disrupt farming.
"Addressing these challenges will be crucial for sustained improvement in the automotive market," FADA said in a note.
