Automobile retail sales in India increased by 14% in July compared to the same month last year, owing to reasons such as a strengthening rural economy, favorable monsoon conditions, and the launch of new goods. According to the Federation of Automobile Dealers Associations (FADA), two-wheelers (2W) climbed by 17%, while passenger vehicles (PV) increased by 10%.
However, this expansion is accompanied with a major risk. Inventory levels in PVs have reached a historic high of 67-72 days, equivalent to Rs 73,000 crore in stock. This presents a significant danger to dealer sustainability.Among other categories, three-wheelers (3W) increased by 13% and commercial vehicles (CV) by 6%. Tractors, on the other hand, continued to underperform, with a 12% year-on-year decline.
"The 2W segment enjoyed significant expansion as a result of a booming rural economy, favorable monsoon impacts, and government assistance programs that increased rural incomes. Despite market slowdowns in certain locations, severe rains, and greater rivalry, the launch of new items and improved stock availability also played a key role," stated C S Vigneshwar, Vice President at FADA. Discounts and the EMPS program deadline boosted electric vehicle (EV) sales in the class.
PV sales increased by 14%, thanks to new model introductions and competitive price tactics. "Dealers noted benefits from increased product availability, more appealing schemes, and a greater selection of items. Nonetheless, frequent rains, poor consumer sentiment, and fierce rivalry presented obstacles. Some dealers were able to maintain sales with heavy marketing and incremental reductions," he explained. FADA encouraged PV original equipment manufacturers (OEMs) to be wary of potential dealer failures owing to excessive inventory levels. It also emphasized the significance of the Reserve Bank of India for financial institutions to conduct strict inspections before releasing inventory finance, ideally requiring dealer permission or collateral to avoid the rise of non-performing assets (NPAs).
CV retail sales increased by 6% year on year, with dealers reporting mixed emotions. Positive characteristics included development in the building and mining industries, while obstacles included persistent rain, unfavorable rural market mood, limited financing options, and expensive car costs. Some merchants expanded through small bulk agreements and by capitalizing on greater market reach and product acceptability.
Vigneshwar noted that after a dry June, monsoons in India have increased, resulting in above-average cumulative rainfall in July. However, the geographical distribution was unequal, with Southern and Central India getting surplus rain and ten meteorological divisions experiencing double-digit deficits. "Kharif sowing has grown by 2.3% since last year, however these data are somewhat deceiving due to the prior year's low sowing activity caused by El Nino disturbances. "Compared to July 2023, the sown area has actually decreased by 2.4%," he remarked.
