Festive season fails to lift auto sales, FADA warns of PV inventory crisis

Passenger vehicle retail sales in India witnessed a 5 per cent on-year decline in August on account of delayed customer purchases, poor consumer sentiment and persistent heavy rains, industry body FADA said on Thursday. The overall passenger vehicle (PV) registrations last month stood at 3,09,053 units, as compared to 3,23,720 units in August 2023.

"Even with the arrival of the festive season, the market remains under significant strain... Inventory levels have reached alarming levels, with stock days now stretching to 70-75 days and inventory totalling 7.8 lakh vehicles, valued at an alarming ₹77,800 crore," Federation of Automobile Dealers Associations (FADA) President Manish Raj Singhania said in a statement.

Rather than responding to the situation, PV Original Equipment Manufacturers (OEMs) continue to increase dispatches to dealers on a month-on-month basis, further exacerbating the issue, he added.

"FADA urgently calls upon all banks and NBFCs to intervene and immediately control funding to dealers with excessive inventory," Singhania said, adding that dealers must also act swiftly to stop taking on additional stock to protect their financial health.

The OEMs, too, must recalibrate their supply strategies without delay, or the industry faces a potential crisis from this inventory overload, he said. "If this aggressive push of excess stock continues unchecked, the auto retail ecosystem could face severe disruption," Singhania said.

Commercial vehicle registrations saw a 6 per cent year-on-year dip in August, while tractor retail sales also witnessed a drop of 11 per cent as compared to the year-ago period.

Two-wheeler sales, however, increased 6 per cent year-on-year to 13,38,237 units in August, as compared to 12,59,140 units in the same month last year, on the back of improved stock availability and the onset of the festive season, Singhania said.

Three-wheeler retail sales also increased by 2 per cent to 1,05,478 units last month, as compared to 1,03,782 units in the year-ago period. Overall registrations last month saw an increase of 3 per cent year-on-year at 18,91,499 units, as against 18,38,501 units in August last year.

On business outlook in the near term, FADA said it remains cautiously optimistic. While the festive season and improved rural demand present promising opportunities for growth, ongoing weather uncertainties and high inventory levels may temper the overall recovery, it stated.

To navigate these challenges, strategic inventory management and targeted marketing initiatives will be crucial in maximising festive sales and mitigating risks from adverse weather conditions, it added.

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