Passenger vehicle dispatches dip marginally in May, two-wheelers edge up

Passenger vehicle dispatches were down by 0.8 per cent to 344,656 units

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Passenger vehicle (PV) dispatches declined marginally in May after posting a 4 per cent growth in the previous month while the same for two-wheelers (2Ws) were up by a meagre 2.2 per cent during the month.

 

According to data from the Society of Indian Automobile Manufacturers (Siam), PV dispatches were down by 0.8 per cent to 344,656 units.

 

Industry watchers said that high dealer inventory has put pressure on dispatches. PV retail sales in May was down by 3.1 per cent year-on-year (Y-o-Y) and 13.6 per cent month-on-month (M-o-M). The Federation of Automobile Dealers Associations (Fada) has said earlier this month that PV inventory day has climbed to 52-53 days. “Elevated inventory days and subdued consumer sentiment — particularly in entry-level models —(were) compounded by war-related tensions for border states (J&K, Punjab, Rajasthan, and Gujarat) and margin-money challenges; (and) healthy bookings offset by weak retail conversions,” Fada had said.

 

Moreover, the Indo-Pak conflict also had an impact on domestic numbers in May, auto companies said. 

 

Partho Banerjee, senior executive officer, marketing and sales, Maruti Suzuki India, had earlier said: “In the month of May, the Indo-Pak war also had a bearing on the domestic numbers. But I am very sure that customers will come back, and they will buy the vehicles. Everything has gone on hold.”

 

The outlook for PV sales is, however, positive given the Reserve Bank of India (RBI) rate cuts and above-normal monsoon predictions. 

 

Rajesh Menon, director general of Siam, said all vehicle segments posted stable performance in May — PV dispatches at 344,656 units, which is the second-highest ever May sales; three-wheelers (3Ws) down by just 3.3 per cent Y-o-Y, and 2W dispatches were up 2.2 per cent M-o-M.

 

“RBI’s three repo rate cuts totalling 100 basis points (bps) in less than six months, along with a forecast of above-normal monsoons are some of the indicators, which should positively impact the auto sector by improving affordability and boosting consumer sentiment in the coming months,” Menon said.

 

Hemal N Thakkar, senior practice leader and director, Crisil Intelligence, said: “The reason behind lower dispatches in May can be attributed partially to muted demand sentiments and partly to high dealer inventory. Rate cuts take some time to translate and it may not necessarily help to reduce inventory levels with dealers very quickly. In fact, if there are production cuts due to the rare earth magnets crisis, it could turn out to be a blessing in disguise.” 

 

Interestingly, the utility vehicle (UV) segment has grown in May, with dispatches rising by 7.6 per cent while the same for passenger cars were down by 12.2 per cent.

 

2W performance has turned around, selling 1.65 million (mn) units, registering a 2.2 per cent growth. In April, 2W sales had disappointed, dropping by 16.7 per cent to 1.45 million. Menon had said that the 2W segment decline in sales was due to the high base effect of April last year, and it was expected to pick up in the coming months. “Auto industry smoothly transitioned to the new regulatory regime of second stage of On-Board Diagnostics (OBD)-2 regulation for two- and three-wheelers from April 2025 onwards, in addition to rolling out E-20-compliant gasoline vehicles across the country from this month,” he had added.

 

Within 2W, the motorcycle segment is flat at 1.03 million while scooter sales have grown by 7.1 per cent.

 

The 3W segment has continued to post a decline in sales for the second consecutive month this financial year. In April, the segment had fallen by 0.7 per cent, and in May the dispatches have shrunk by 3.1 per cent Y-o-Y.

 

As for PVs, auto OEMs (original equipment manufacturers) like MSIL feel that unless the small car market grows, the overall numbers will not grow fast. “We have always been talking about increasing the size of the flywheel, and that will only happen when the small car market grows. Fundamentally, the cost of vehicles is going up as more and more regulations are getting added, and that is an affordability issue which we all have been talking about. Till the time the small car market does not start growing, people don't upgrade from 2Ws to 4Ws, I think this problem will persist,” he had said during the company’s results call.