RBI's status quo on repo rate to impact retail auto sales, says Fada

But says govt spending, expected good monsoon may support demand

The Reserve Bank of India’s (RBI’s) decision to keep the repo rate unchanged for 14 straight months will “badly impact” retail auto sales, the Federation of Automobile Dealers Associations (Fada) said on Monday.
 

Especially in the case of entry-level vehicles, buyers are highly price sensitive. Given the continued inflationary trend, they may continue to hesitate without any relief in finance rates, Fada said.
 

Quoting Centre for Monitoring Indian Economy (CMIE) data, the dealers’ body said there was a notable decline in consumer sentiment among urban Indians and the automotive sector faced a “nuanced challenge”.
 

“In this scenario, the decision of the MPC (Monetary Policy Committee) of the RBI to keep lending rates unchanged at 6.5 per cent would continue to badly impact the retail sales of all vehicles, especially entry-level vehicles, as these buyers are extremely price sensitive,” Fada said.
 

While Fada said these challenges, coupled with the forthcoming elections, would potentially curb vehicle sales across all segments, the FY25 outlook for the industry was of growth amid a mix of optimism and challenges.
 

Manish Raj Singhania, president, Fada, said that favourable government policies coupled with government spending and expected good monsoon was expected to fuel demand, especially in rural areas.
 

Fada also declared that auto sales climbed a new sales peak in FY24 with sport utility vehicles (SUVs) driving passenger vehicle (PV) demand, and now command a 50 per cent share of the PV market.
 

But, retail auto sales grew only 3.14 per cent Y-o-Y in March.
 

Two-wheeler and three-wheeler sales rose 5 per cent and 17 per cent, respectively, while (PV), tractor and commercial vehicle sales declined 6 per cent, 3 per cent, and 6 per cent respectively, in the month.
 

“Two-wheelers showed resilience, with EV (electric vehicle) sales surging in March thanks to expiration of the FAME II subsidy on March 31. This led to a notable boost in the 2W EV market share to 9.12 per cent,” Singhania said.
 

Three-wheelers did well in March, hitting an all-time high retail sales figure of 105,222 units. The passenger vehicle (PV) sector encountered challenges with 2 per cent month-on-month decline and a Y-o-Y fall of 6 per cent.
 

It was a different story for the full-year numbers.

Overall auto retail sales clocked double-digit growth of 10 per cent Y-o-Y, with two-wheelers, three-wheelers, passenger vehicles, tractors, and commercial vehicles all registering growth. PV, tractors and three-wheelers set new record highs in retail sales, Fada said.