Two-wheelers, cars and SUVs see demand in August as dealers prepare for festive season

After remaining lukewarm for several months, the Indian automobile industry returned to ‘healthy’ growth in August 2023, pointed out analysts, boosted by inventory build-up ahead of the key festive season.

“The overall wholesale volume performance was healthy in August 2023,” JM Financial said, adding that two-wheelers and passenger vehicles witnessed an increase in its demand growth.

Numbers showed that demand for domestic passenger vehicles and two-wheelers witnessed mid-single-digit growth, although wholesales for commercial vehicles remained weak, particularly those of light commercial vehicles.

Tractor demand too was impacted due to a deficient monsoon, while exports also failed to show much recovery.

Two-wheeler revival

Two-wheelers have been seeing a slow revival in its demand especially from the rural areas ahead of the festive season. The two-wheeler industry volumes — which have been flucutating in recent months due to poor demand from rural areas — increased by nearly 6% in August on a year-on-year basis.

The steady demand for two wheelers in August was attributed to the sustained outperformance of the premium segment and gradual recovery in EV volumes.

However, the sales of electric two-wheelers are expected to take a hit with the recent subsidy cut in FAME-II, analysts pointed out.

The government revised the FAME-II subsidy amount to Rs 10,000 per kWh as against the earlier amount of Rs 15,000 per kWh. It also capped incentives on e-2Ws at 15% of the ex-factory price of vehicles from 40% earlier. These changes increased e-2W prices by up to Rs 30,000 a unit.

The wholesale demand for two wheelers is also expected to show recovery towards the onset of the festive season, JM Financial added.

In terms of companies, TVS Motor reported a 4% year-on-year increase in volumes led by 17% year-on-year growth in scooters.

Royal Enfield volumes increased by 11% on a year-on-year basis driven by 11% year-on-year increase in domestic volumes and 13% increase in export volumes.

Bajaj Auto reported 15% year-on-year decline in overall volumes due to the high base of August 2022, while Hero MotoCorp Limited’s volumes increased by 6% year-on-year in August 2023.

Cars & SUVs on rise 

The domestic passenger vehicles volumes grew by 5% on a year-on-year basis in August 2023.

“In the passenger vehicles segment, wholesales in near-term are likely to be a function of further normalisation of supplies and response to recent model launches,” said JM Financial.

Currently, it said, wholesale volumes of passenger vehicles are higher than retail volumes as manufacturers continue to fill up channel inventory ahead of the festive season.