In this episode of the State of the Economy podcast, host S. Ronendra Singh discusses the performance of automobile sales during the 2024 festive season with CS Vigneshwar, President of the Federation of Automobile Dealers Associations (FADA).

Vigneshwar offers insights into the growing role of electric vehicles, challenges related to inventory levels, and the outlook for the coming months as the year draws to a close.

“We are looking at this momentum continuing, and we are looking at a fairly good couple of months from now,” says Vigneshwar, expressing optimism about the continued momentum in the automobile sector.

Retail sales growth in October 2024 was impressive, with overall sales increasing by 32% year-on-year, with two-wheelers leading the charge with a 36% increase. Passenger vehicle sales also saw a 32% boost, as the festive season brought a surge in consumer demand.

Vigneshwar highlights the significant role rural markets are playing in this recovery, noting that “55.5% of two-wheeler sales and 39% of passenger vehicle sales came from rural areas.” This marks a strong revival from rural India, which has been instrumental in driving sales this year. He further adds, “Rural India slowly started climbing back the charts in terms of contribution,” emphasising that rural demand has returned with strength.

Regarding the challenges of managing high inventory levels across dealerships, Vigneshwar states, “We were at about 75 days of inventory at the start of the month,” which was unsustainable. He hopes that manufacturers will take action to optimise inventory levels and reduce discounts in the coming months, further boosting profitability for dealers. According to him, the industry has been “hoping this would reduce further in the next month,” with expectations for a smoother inventory flow by December.

As the industry embraces new technologies, the shift to electric vehicles (EVs) is becoming more prominent. Vigneshwar points out that “the two-wheeler segment, especially in the scooter segment, is primed for the change to EVs and is changing very quickly.” He notes that while government subsidies have fluctuated, the EV market is steadily gaining momentum, with dealerships preparing for even more rapid adoption in the future.

Vigneshwar also discusses the impact of the government’s vehicle scrappage policy, calling on state governments to take more action: “State governments have to probably start working harder at this because most of the states... have not implemented the policy.” He advocates for a clearer, more efficient system to allow customers to take advantage of scrapping incentives and help accelerate the transition to newer, more efficient vehicles.

Looking ahead, Vigneshwar is optimistic about the future of the automobile industry, noting that “the next couple of months are going to be strong in terms of retail,” driven by the marriage season and ongoing consumer confidence. The industry is poised for continued growth in 2025, with strong sales expected to carry through into the new year,” he adds.

Listen in!

(Host: S Ronendra Singh; Producer: Siddharth Mathew Cherian)

About the State of the Economy podcast

India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders.

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