A FADA survey shows 59% of auto dealers expect growth from June-August 2026, buoyed by rural income and monsoon hopes. May retail sales grew 9.6% YoY, led by passenger vehicles (+23%) and two-wheelers (+7.5%), despite economic headwinds.
The Federation of Automobile Dealers Associations' (FADA) recent survey on sales in May, shows 59 per cent of dealers expect growth in June-August 2026, up from 50.9 per cent in April-26 and brokerage firm Emkay global noted that the stronger outlook is tied to the rural income cycle as Kharif sowing gathers pace, supported by monsoon flows.
For the near term, sentiment for June-26 remains measured but cautiously optimistic, with 50.5 per cent of dealers expecting growth, 39.9 per cent seeing a flat market and 9.6 per cent forecasting a decline. Commodity cost pressures are a monitorable, but rural cashflows should provide structural support.
May Sales Surge Despite Headwinds
The retail volumes in May grew 9.6 per cent year-on-year despite macro headwinds like heatwaves, fuel price revisions and West Asia-led freight anxieties. The broad-based growth was led by passenger vehicles and two-wheelers, while commercial vehicles stayed tepid.
Passenger Vehicles Lead the Charge
Passenger vehicles were the strongest segment, up 23 per cent YoY. Rural PVs outpaced urban at 30.4 per cent vs 19 per cent YoY, driven by small-car revival coexisting with the sustained SUV shift, improved rural incomes, new launches and better financing. Electric PV share rose to 6.5 per cent from 4.5 per cent a year ago. However, channel inventory rose to 31-33 days in May from 28-30 days in April, above FADA's 21-day benchmark. With June seasonally soft, OEM dispatch restraint will be key to avoid further pile-up.
Two-Wheeler Segment Performance
Two-wheelers grew 7.5 per cent YoY despite heatwaves dampening walk-ins and selective supply gaps. Marriage-season buying and GST 2.0 affordability supported demand. Fuel-price revision was the big catalyst, pushing E-2W penetration to 9.3 per cent from 6.1 per cent in May-25 as enquiries shifted to fuel-efficient and alternative powertrains.
Commercial Vehicles and Tractors
Commercial vehicles grew 5.3 per cent YoY, with rural at 8.1 per cent vs urban at 2.6 per cent. LCVs led at 7.7 per cent YoY on last-mile e-com logistics and replacement demand. MHCV growth stayed tepid as fleet owners await clarity on freight rates and the West Asia crisis. Dealers cited steady freight activity and e-com movement as positives, but higher financing TAT and insurance costs remain monitorables.
Tractors rose 11.2 per cent YoY ahead of Kharif on healthy farm economics, while wheeled construction equipment fell 17.5 per cent on a high base.
Brokerage Outlook
Emkay Global said that it prefers 2Ws and CVs over PVs for better pricing flexibility amid commodity pressure. In 2Ws, TVSL/Ather are structural picks while BJAUT offers better risk-reward at 21x FY28E PER. For CVs, TMCV is preferred to play the upcycle. (ANI)
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