Passenger vehicle (PV) retail sales in India experienced a 10 percent year-on-year increase in July, spurred by new model launches and enhanced discounts, the Federation of Automobile Dealers Associations (FADA) reported on Monday.
Total PV retail sales climbed to 3,20,129 units in July, up from 2,90,564 units in July 2023. “Dealers reported benefits from good product availability, attractive schemes, and a wider range of products,” stated FADA Vice President C.S. Vigneshwar.
Despite challenges such as heavy rains, low consumer sentiment, and intense competition, dealers managed to sustain sales through robust promotions and incremental discounts, Vigneshwar added. However, he cautioned that this growth comes with high inventory levels, now at a historic high of 67-72 days, equating to Rs 73,000 crores worth of stock.
“This poses a substantial risk for dealer sustainability, necessitating extreme caution. FADA urges PV original equipment manufacturers (OEMs) to be vigilant about potential dealer failures due to these high inventory levels,” Vigneshwar emphasised.
He also highlighted the need for the Reserve Bank of India to mandate 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).
In the two-wheeler segment, retail sales last month stood at 14,43,463 units, marking a 17 percent increase from 12,31,930 units in July 2023. The segment’s growth was attributed to a thriving rural economy, positive monsoon effects, and government support programs 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,” Vigneshwar noted.
Commercial vehicle (CV) retail sales saw a 7 percent year-on-year increase to 80,057 units in July. “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,” Vigneshwar said.
In contrast, tractor sales declined by 12 percent year-on-year to 79,970 units in July. FADA, which collated vehicle registration data from 1,568 out of 1,645 RTOs across the country, noted a blend of optimism and caution in the near-term outlook across the auto retail segments.
Two-wheeler sales are expected to be buoyed by a growing rural economy, positive monsoon impacts, and the introduction of new products. The festive season beginning after the Aadi festival and favorable agricultural conditions are also likely to contribute to increased sales. However, heavy rainfall, ongoing agricultural activities, and inconsistent monsoon patterns may dampen demand in certain areas.
For the PV segment, FADA forecasts mixed results in the near term. While the festive season, attractive schemes, and good monsoon are expected to boost sales, concerns over low consumer sentiment, heavy rainfall, and a lack of new product launches persist. High inventory levels pose a significant risk, and it is crucial for PV OEMs to avoid further increases in stock to prevent financial strain on dealers.
The CV segment faces a modest outlook, with positive factors including improved market reach and the festive season, tempered by challenges such as bad freight rates and ongoing rainfall.
