Automobile retail sales in India grew by 14 per cent in July compared to the same period last year, driven by factors such as a growing rural economy, positive monsoon impacts, and the introduction of new products. While two-wheelers (2W) grew by 17 per cent, passenger vehicles (PV) posted a 10 per cent increase, according to the Federation of Automobile Dealers Associations (FADA).
However, this growth is accompanied by a significant concern. Inventory levels have surged to a historic high of 67-72 days in PVs, equating to Rs 73,000 crore worth of stock. This poses a substantial risk to dealer sustainability. Among other categories, three-wheelers (3W) grew by 13 per cent, and commercial vehicles (CV) by 6 per cent. Tractors, however, continued to underperform, falling by 12 per cent year-on-year (Y-o-Y).
“The 2W segment experienced notable growth due to a thriving rural economy, positive monsoon effects, and government support programmes enhancing rural incomes. The introduction of new products and better stock availability also contributed significantly, despite market slowdowns in certain regions, excessive rains, and increased competition,” said C S Vigneshwar, vice president, FADA. The segment also saw an increase in electric vehicle (EV) sales due to discounts and the EMPS scheme deadline.
PV sales saw robust 14 per cent growth, driven by new model launches and attractive pricing strategies. “Dealers reported benefits from good product availability, attractive schemes, and a wider range of products. Nonetheless, heavy rains, low consumer sentiment, and intense competition posed challenges. Some dealers managed to sustain sales through strong promotions and incremental discounts,” he added. FADA urged PV original equipment manufacturers (OEMs) to be vigilant about potential dealer failures due to these high inventory levels. It also stressed the importance of the Reserve Bank of India mandating financial institutions to implement stringent checks before releasing inventory funding, preferably requiring dealer consent or collaterals to prevent the escalation of non-performing assets (NPAs).
CV retail sales showed 6 per cent Y-o-Y growth, with dealers reporting mixed sentiments. Positive factors included growth in the construction and mining sectors, while challenges such as continuous rainfall, negative rural market sentiment, poor finance availability, and high vehicle prices were also noted. Some dealers achieved growth through small bulk deals and by leveraging increased market reach and product acceptability.
Vigneshwar added that following a deficient June, monsoons in India have intensified, resulting in above-normal cumulative rainfall for July. However, the geographical distribution was uneven, with Southern and Central India receiving excess rain, while 10 meteorological divisions experienced a double-digit deficit. “Kharif sowing has increased by 2.3 per cent since last year, but these figures are somewhat misleading due to poor sowing activity in the previous year caused by El Nino disruptions. Compared to July 2023, the sown area has actually decreased by 2.4 per cent,” he said.
First Published: Aug 05 2024 | 10:50 AM IST
