According to Emkay Global Financial Services, festive season pushed growth in automobiles industry, led by rural push in 2Ws (two-wheelers)

The Federation of Automobile Dealers Associations (FADA) reports that during the festive season of 2023—which lasted 42 days, from the first day of Navratri to the fifteen days after Dhanteras—auto sector retail volumes increased by around 19% year over year. The 2W (two-wheeler) increase in sales was around 21% higher. With 28,93,107 units sold, the 2W sales had the largest holiday sales volume since 2019. PV at 5,47,246 units and 3W at 1,42,875 units came next. Emkay believes that the 2W festive performance is not an exception and that record-high fleet age (industry volumes were still about 25% below peak as of FY23) would drive development in this sector over the next two to three years. This will probably trigger an upturn led by replacements.

During the 2023 holiday season, industry retailers recorded a year-over-year growth of 18.7% to reach almost 3.8 million units, according to FADA. A 20.7% rise in 2Ws' volume and a 41.4% increase in 3Ws' volume drove growth. Tractors remained the same, but Passenger Vehicles (PVs) grew by 10.3% and Commercial Vehicles (CVs) by 8.1%.

Strong rural support for 2W was underlined in FADA's commentary; HMCL had previously announced its best-ever festive season, with retail volumes up ~19% year-on-year, helped by growing demand in rural areas. Emkay notes that the market for high-end bikes has been robust (from October through November, BJAUT's above-125cc retails grew by about 50% year over year, while Royal Enfield's seasonal volumes increased by 13–14% year over year).

PVs performed less than expected during Navratri (up 6.5% year-over-year), but they rebounded nicely after (up 11.7% year-over-year), with an overall year-over-year gain of almost 10%. SUV demand is still robust, according to the FADA, but the segment's stock levels are alarming because Original Equipment Manufacturers (OEMs) are still requesting dispatches, driving inventory levels to nearly all-time highs.

During the holiday season, CV retail growth was roughly 8% year-over-year. As rural consumers' spending power started to increase once more, tractor retail sales momentum picked up towards the end of the festival season (~8% fall during Navratri versus ~2% year-over-year growth post-Navratri).

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.