Rural automotive demand might see an uptick during the festive season: FADA

The automotive industry in India has been navigating challenging waters since the onset of the COVID-19 pandemic, but there may be a glimmer of hope on the horizon. The Federation of Automobile Dealers Associations (FADA) suggests that rural auto demand could pick up during the festive season, though a full recovery might still be a couple of years away.

In the wake of the pandemic, sales in the entry-level segments of both two-wheeler and four-wheeler markets plummeted, witnessing a steep 25% decline compared to pre-COVID levels. However, the festive season provided a silver lining, as rural markets experienced a surge in demand. This uptick was attributed to the auspiciousness associated with purchasing vehicles between September and November.

Manish Raj Singhania, President of FADA, expressed optimism about the rural market's revival this year to Business Today, anticipating it to outperform the previous year. However, he cautioned that it might not reach pre-COVID levels just yet, attributing the medium-term challenges to unexpected rainfall patterns in August, which could extend the recovery timeline to about two years.

One key factor contributing to this cautious outlook is the transition from BS-IV to BS-VI emission norms, which led to a significant increase in the cost of entry-level vehicles. For instance, the prices of entry-level two-wheelers surged from Rs 38-39,000 to Rs 60,000, while models like the Alto went from costing around Rs 1.82 lakh to Rs 3.5 lakh.

While premium cars and motorcycles are witnessing robust sales, the entry-level retail sector, which relies heavily on rural markets for 70% of its sales, is yet to see a revival.