Auto sales down 9.3% in September, dealers face inventory crisis
The Federation of Automobile Dealers Association (FADA) has reported a major drop in overall automobile sales for September. The data shows a year-on-year (YoY) decrease of 9.26%, with varying performance across different segments. Despite the festive season, events like Ganesh Chaturthi and Onam didn't boost demand as expected. Consequently, dealers are struggling with record-high inventory levels. This downturn is attributed to several factors, including weak consumer sentiment and heavy rains.
Two-wheeler sales hit by weak consumer sentiment
Two-wheeler retail sales also took a hit, witnessing an 8.51% YoY decline. FADA has blamed weak consumer sentiment, less inquiries, and delayed purchases because of heavy rains and seasonal factors like Shraddh for the slump. The association observed that the 2024 southwest monsoon recording 8% above-normal rainfall, had disrupted auto retail performance in several regions and hurt demand and walk-ins.
Passenger vehicle sales witness steep decline
Passenger vehicle sales witnessed a sharp decline of 18.81% YoY, while commercial vehicles sales fell 10.45% YoY with only a marginal month-on-month growth of 1.46%. According to FADA, these numbers show subdued market conditions and weak government spending. The association also noted that passenger vehicle dealers are struggling with record-high inventory levels due to aggressive OEM dispatches, resulting in financial pressure and increased cash flow challenges.
FADA urges RBI to issue stricter guidelines
In light of the situation, FADA has called on the Reserve Bank of India (RBI) to issue stricter guidelines on channel funding policies. This would help reduce the financial risk dealers are facing due to unsold stock. "Given the critical festive season around the corner, FADA urges OEMs to take immediate corrective measures," said FADA President C S Vigneshwar.
FADA optimistic about sales boost
Despite the current challenges, FADA is hopeful of a sales boost in the upcoming festive season. The association hopes that both Navratri and Diwali falling in the same month will boost sales. Further, favorable agricultural conditions due to a good monsoon and improved crop yields are expected to drive rural demand for two-wheelers, passenger vehicles, and tractors.
