Indian auto industry poised to grow amidst mix of optimism and challenge: FADA

The Indian auto industry has witnessed moderate growth in both passenger vehicles and two-wheeler segments in FY24, which just concluded in March this year. Entering into the new financial year FY25, the Indian auto industry is poised to grow further amidst a mix of optimism and challenges, hopes the Federation of Automobile Dealers Associations (FADA), the apex national body of automobile retail industry in the country.

In an official statement, while revealing the retail sales numbers of each segment in the last financial year, FADA has stated that the excitement around new product launches, particularly electric vehicles sets a forward-looking tone for the long term. Quoting the findings from research by the Centre for Monitoring Indian Economy (CMIE), it stated that manufacturers are gearing up with better supply chains and an array of new models to meet diverse consumer demands. Besides that, economic growth, favourable government policies and an anticipated good monsoon are expected to fuel consumer demand further in the long term, especially in the rural areas, which generally play a highly crucial role in sales of SUVs and two-wheelers.

Speaking about consumer sentiment, the statement further said that the market sentiment is cautiously optimistic. The auto industry is banking big on improved customer engagement and financing schemes to boost sales. However, there are challenges as well. FADA has noted factors like a high base in the passenger vehicle segment and intense competition are posing challenges for the growth in the segment. “The focus is on overcoming these hurdles with innovation and strategic market engagement, aiming for balanced growth across all the segments. As FY25 unfolds, the Indian auto industry is navigating through evolving market demands and economic conditions, leveraging its strengths for sustainable growth and a wider reach," reads the statement.

Unchanged lending rates to impact vehicle retail sales

Quoting the CMIE study, the FADA statement has noted that with a notable decline in consumer sentiment among urban Indians, the country's automotive sector will face a nuanced challenge in the near term. This downturn is attributed to a restraint in discretionary spending of urban consumers. This is claimed to add a layer of complexity to the auto industry's business.

In this scenario, the decision of the Monetary Policy Committee of India (MPC) of the Reserve Bank of India (RBI) to keep the lending rates unchanged at 6.5 per cent would continue to badly impact the retail sales of all vehicles, especially the entry-level vehicles, considering this category witnessed a major price surge and the buyers in this space are extremely price sensitive, stated FADA. It also said that given the continued inflationary trend without any relief in finance rates, prospective buyers in the entry-level vehicle segment may continue to hesitate. The organisation further added that coupled with the forthcoming elections, these challenges will influence the industry, potentially curbing vehicle sales across all segments.

However, there is a silver line as well. Despite these challenges, opportunities for rebound and growth linger there, bolstered by festive occasions and strategic product unveilings aimed at reviving consumer interest, claimed the statement.