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Informist, Thursday, Sep 5, 2024

 

--FADA: Passenger vehicle inventory range between 70-75 days    
--FADA: Uncertain weather, high inventory may temper sales recovery
--FADA: Ganesh Chaturthi, Onam, Navratri may boost urban sales    
--FADA: Slow construction activity, liquidity issues may hit CV sales    
--FADA: Shraddh period in Sept likely to pause sales for sometime    
--FADA: Continued heavy rains may affect rural sales in near term    
--FADA: Aug total vehicle retail sales up 2.9% on yr at 1.89 mln units    
--FADA: Retail sales of tractors dn 11.4% on yr at 65,478 units in Aug    
--FADA: Aug 3-wheeler retail sales up 1.6% on year at 105,478 units    
--FADA: Retail sales of CV down 6% on year at 73,253 units in Aug    
--FADA: Aug 2-wheeler retail sales up 6.3% on yr at 1.34 mln units    
--FADA: Retail sales of passenger vehicles down 4.5% on year in Aug    
--FADA: Retail sales of passenger vehicles at 309,053 units in Aug    

 

MUMBAI – India's automobile retail sales saw modest growth on a year-on-year basis in August due to weather-related disruptions, high inventory, and weak consumer sentiment, according to the Federation of Automobile Dealers Associations. Dealerships sold a total of 1.89 mln vehicles in August, against 1.84 mln units in the year-ago period and 2.03 mln vehicles in July. While sales of two- and three-wheelers rose on year, volumes of passenger and commercial vehicles and tractors fell. On a sequential basis, retail sales declined across segments. 
 

"This monsoon season brought unpredictable weather, starting with extreme heat waves which delayed the monsoon and transitioned into heavy rainfall, leading to flood-like conditions in several areas. These weather anomalies have had a direct impact on India's auto retail market," said Manish Singhania, president of the Federation of Automobile Dealers Associations.  

 

In August, two-wheeler retail sales, which account for around 70% of total vehicle sales, rose 6.3% on year to 1.34 mln units due to improved stock availability and the onset of the festival season. However, the segment sales declined 7.3% over July due to excessive rains and flooding, which disrupted demand across various regions. "Many customers postponed their purchases, anticipating new product launches, while others deferred due to market saturation and changing preferences. Limited marketing efforts from original equipment manufacturers and subdued market sentiment further impacted sales," Singhania said. 

 

Three-wheeler retail sales rose by 1.6% on year to 105,478 units in August. Sales of internal combustion engine rickshaws, used for ferrying passengers, rose 7.3% on year to 48,005 units, while those of electric variants fell 4% on year to 44,346 units. On a sequential basis, overall segment sales fell 4.5%.

 

In August, retail sales of passenger vehicles fell 4.5% on year and 3.5% sequentially to 309,053 units. Even with the arrival of the festival season, the market remains under significant strain due to delayed customer purchases, poor consumer sentiment, and persistent heavy rains, Singhania said. 

 

On the passenger vehicle inventory, Singhania said the inventory levels have reached alarming levels, with stock days now stretching to 70–75 days and inventory totalling 780,000 vehicles, valued at an alarming 778 bln rupees. "Rather than responding to the situation, passenger vehicle original equipment manufacturers continue to increase dispatches to dealers on a month-on-month basis, further exacerbating the issue," he said.

 

The association has asked banks and non-banking finance companies to intervene and immediately control funding to dealers with excessive inventory. "Dealers must also act swiftly to stop taking on additional stock to protect their financial health. Original equipment manufacturers, too, must recalibrate their supply strategies without delay, or the industry faces a potential crisis from this inventory overload," Singhania said.

 

In August, retail sales of commercial vehicles fell 6.1% on year and 8.5% sequentially, on account of a decline in sales of all sub-segments. A total of 73,253 commercial vehicles were sold during the month, compared with 77,967 in August 2023 and 80,057 units in July. Light vehicle sales accounted for nearly 58% of the segment sales in August, followed by the heavy and medium segment volumes. 

"Heavy rains, floods and landslides severely impacted market activity in August. Additionally, reduced construction activity and sluggish demand in the industrial sectors further strained (commercial vehicle) sales," Singhania said. "The commercial vehicle segment continues to struggle, facing pressure from steep discounting by competitors, which has only intensified the decline. Weak sentiment, coupled with inventory and cash flow challenges, continues to affect the industry overall."  In August, sales of tractors fell the most, by 11.4% on year and 18.1% sequentially to 65,478 units.

 

On the near-term outlook for retail sales of vehicles in India, the association said the auto industry remains cautiously optimistic. While the festival season and improved rural demand present promising opportunities for growth, ongoing weather uncertainties and high inventory levels may temper the overall recovery.

 

India experienced 16?ove-normal rainfall in August, with additional rainfall forecast for September. This excessive rainfall poses a significant risk to crops nearing harvest. Continued heavy rains could negatively affect rural sales, as reduced agricultural output may lead to diminished purchasing power, according to the association. Additionally, the Shraddh period in September, regarded as an inauspicious time for purchases, is expected to pause sales for some time.

 

In the commercial vehicle segment, sluggish construction activity, liquidity issues, and weather-related disruptions are expected to suppress demand further, the association said. Aggressive discounting practices continue to pressure dealers, leading to reduced profitability and cautious market sentiment.

 

"On the positive side, the upcoming festivals, such as Ganesh Chaturthi, Onam and Navratri, are expected to boost consumer sentiment, especially in urban areas. Moreover, favourable rainfall in certain regions has improved agricultural prospects, which could enhance purchasing power in rural areas as the monsoon subsides," the association said.  End

 

Reported by Darshan Nakhwa 

Edited by Manisha Baxla

 

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