Auto Retail Grows in Low Single-Digit In June; Dealers Sceptical About July

India’s automobile retail market witnessed a year-on-year growth of 4.84% in June, according to data released by the Federation of Automobile Dealers Associations. The growth was at 5% in May.

Although the year-on-year figures indicate continued resilience, a noticeable month-on-month softness and muted booking across categories suggest that growth is not yet on firm ground. FADA has adopted a cautiously optimistic stance, banking on rural demand recovery and government capital expenditure, but remains vigilant against seasonal disruptions, elevated ownership costs, and emerging supply-chain headwinds.

Segment-wise Performance
Two-wheeler sales, the largest component of the market, rose 4.73% year-on-year to 1.45 million units. However, on a month-on-month basis, sales dipped 12.48% due to variant shortages, tighter financing, and early monsoon showers. Rising electric vehicle adoption is also subtly reshaping purchase preferences, especially in urban pockets.

Passenger vehicle retail grew 2.45% year-on-year to nearly 298,000 units, but slipped 1.49% sequentially. FADA cited high inventory levels of around 55 days and uneven buyer interest as reasons. Heavy rainfall and liquidity constraints dampened showroom footfall, although some relief came through new booking offers and incentive schemes.

Commercial vehicle sales posted a 6.6% annual increase, aided by early-month deliveries. However, the segment saw a 2.97% decline over May as ownership costs rose due to new taxation rules and the mandatory fitment of air-conditioned cabins.

Other categories, such as tractors and construction equipment outperformed, benefiting from early kharif sowing and a surge in infrastructure activity.

The forecast of above-average monsoon rains in July is seen as a potential boost for rural demand, especially for two-wheelers and tractors. Government capital expenditure in transport and green energy projects should also support commercial vehicle demand.

However, FADA warned of emerging challenges. Dealer sentiment is leaning negative, with 42.8% expecting flat growth and 26.1% anticipating a decline. Only 31.1% foresee an uptick in July. Booking enquiries remain tepid, just 21% of two-wheeler dealers, 38% of PV dealers, and 32% of CV dealers report healthy pipelines.

Additionally, geopolitical tensions, component shortages due to rare-earth supply constraints, and potential spillovers from US tariff policies may weigh on sentiment and supply chains.