Elections could negatively impact Indian auto sales in May

Elections in India have given rise to a lot of uncertainty which could negatively impact automakers’ sales in May despite the rising consumer interest in new model launches, a dealer’s body said on Wednesday.

Voting in India began on April 19 in a massive general election where Prime Minister Narendra Modi is contesting for a rare third straight term.

"Election uncertainty continues to affect market sentiment, delaying customer conversions and stalling purchasing decisions," the Federation of Automobile Dealers Association (FADA) said in a statement.

The turnout being lower than anticipated ruffled PM Modi’s campaign managers, raising concerns about the odds of the Bharatiya Janata Party and its allies achieving the landmark victory forecasted by opinion polls last month.

Analysts have expressed concerns about the new government’s financial policies and how they will affect the livelihood of people. The restriction on moving large sums of money during the election would also dissuade consumers from buying vehicles at least during May when the election will be in full swing in most constituencies.

Despite that, sales increased 27% year-on-year in April. According to FADA, which tracks sales of vehicles by dealers to consumers, this sales figure could be attributed to the increasing consumer inclination towards launches of new models in India. It added that the interest would not decline in May.

"The auto industry remains cautiously optimistic about its near-term outlook," it said. Since the auto sector contributes approximately 7% to India’s economy, auto sales are keenly being monitored as a key indicator of private consumption in India.

After dropping more than 6% in March, retail car sales increased nearly 16% in April, FADA said. On the other hand, two-wheelers continued to witness heavy demand, facilitated by festive buying in parts of North India and many new launches.

Interestingly, the sales of two-wheelers grew more than 33% in April, its largest growth recorded so far during this calendar year.

FADA President Manish Raj Singhania attributed this rise to stable fuel prices, a favourable monsoon outlook, festive demand and the ongoing marriage season. "New model launches also helped drive growth, despite some delays in supply," he said.