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According to FADA, the near-term outlook for automobile retail is cautiously optimistic. Photo: Bloomberg
Passenger vehicle retail sales dropped sharply by 19 per cent in September, largely due to seasonal factors such as heavy rainfall and ‘Pitru Paksha’ or ‘Sharadha’ — a 16-day lunar period when purchasing a new product is avoided by many.
This sharp year-on-year (Y-o-Y) dip in sales exacerbated another challenge that the sector has been facing for a while now, the inventory pileup. It soared to a historically high mark of 80-85 days for the dealers, which is equivalent to 790,000 vehicles worth Rs 79,000 crore.
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In the month of August, the inventory level was at 70-75 days, totalling 7.8 lakh vehicles, valued at an alarming Rs 77,800 crore.
The latest figures were released by Federation of Automobile Dealers Associations (FADA) as part of its monthly update on Monday.
FADA, however, said that the near-term outlook for automobile retail is cautiously optimistic as both Navratri and Diwali fall in the same month, creating strong expectations for a surge in vehicle sales.
But the association also struck a note of caution.
Given the critical festive season around the corner, FADA has urged original equipment manufacturers (OEMs) to take immediate corrective measures to avoid a financial setback.
It also asked the Reserve Bank of India (RBI) to issue an advisory to banks, mandating stricter channel funding policies based only on dealer consent and on actual collateral, to prevent dealers from facing additional financial pressure due to unsold stock.
“This is the final opportunity for OEMs to recalibrate and support market recovery before it is too late,” said C S Vigneshwar, president of FADA.
Interestingly, the overall retail sales for September declined by 9.26 per cent, with all the other categories, except three wheelers and tractors showing a sharp decline compared to the same time last fiscal. Two wheelers and commercial vehicles dipped by 9 per cent and 10.45 per cent respectively, in addition to the massive dip in passenger vehicle sales. Three wheelers saw an increase of 0.66 per cent and tractors by 15 per cent during the month under review.
Among carmakers, Maruti Suzuki saw a dip of 20 per cent in sales to 1,41,318, while that of Hyundai Motor India declined by 25 per cent, Tata Motors by 19 per cent. Among the top four players, Mahindra and Mahindra saw a marginal rise of 0.4 per cent, surpassing Tata Motors as the number three player.
“Despite the onset of festivals such as Ganesh Chaturthi and Onam, dealers have reported that the performance has been largely stagnant. This suggests that overall market sentiment during these festive periods has been underwhelming, with a trend leaning towards flat or negative growth,” Vigneshwar said.
“The Shraddh period further impacted sales negatively, leading to a YoY (year-on-year) decline in retail sales across various categories. Discounts and offers have been introduced across segments to stimulate demand, but these have yet to translate into a significant improvement in sales,” he added.
But, Vigneshwar also said that the upcoming festivals may drive the sales.
“With healthy water levels in reservoirs and improved crop yields supporting rural demand, the festive season is expected to drive a substantial boost in 2W, PV, and tractor sales with new launches been planned for the month. However, the PV segment faces a critical situation due to high inventory levels at dealerships,” he added.
If sales do not pick up as expected in October, dealers could face significant financial pressure from unsold stock piling up in their warehouses. While dealers and OEMs are betting on robust festive sales, especially in rural markets where positive cash flow and better agricultural conditions are expected to spur demand, the outcome remains uncertain, he said.
First Published: Oct 07 2024 | 10:33 AM IST
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