Retail sale of automobiles in India in September registered a 10.24 percent decline over last year, painting a far less optimistic picture of the industry than the one projected by a near 20 percent jump in factory dispatches even as some green shoots have started to sprout in the passenger vehicle segment.
The overall decline was significantly less than the 27 percent drop in sales in August, which signalled that the rebound in economic activity is gathering steam albeit at a lower pace on the ground that what manufacturers would like to show.
Figures released by manufacturers on the first of every month as vehicles dispatched from factories to dealerships across the country and dealers have perennially contested claims of high growth in the absence of optimism with actual buyers. The Indian economy contracted by a record 24 percent in the first quarter and is slated to log a double digit decline in fiscal 2020-21.
There was some optimism in the passenger vehicle category, however, as sales returned to black for the first time ever this year with a 9.8 percent growth at 195,665 units. This was lower than the 31.5 percent growth in factory dispatches when manufacturers shipped almost 100,000 more vehicles to build up stocks at dealerships in anticipation of robust sales in the festive months of October and November.
"With the Government's persistent effort to unlock India, the month of September continued to witness automobile registrations on a rise as compared to previous months. Passenger Vehicles for the first time saw positive growth coming back on YoY basis," said Vinkesh Gulati, president, FADA.
"With social distancing on customer's mind coupled with government's push to further normalise business conditions and banks becoming more considerate to finance vehicles, entry level passenger vehicles saw good demand thus indicating a preference for personal transportation over public. New launches & vehicle availability played their part as catalyst. A lower base during last FY also helped the cause."
In other segments, the situation remains dire. Two wheelers logged a 12.6 percent decline in sales at 10,16,977 units while commercial vehicle sales crashed 33.65 percent at 39,600 units. The Federation of Automobile Dealers Association (FADA) has raised concerns on the divergence in figures between wholesale and retail across segments citing significant build up of inventory at showrooms.
"Auto sales are expected to witness a renewed growth and may close at par with last year. Passenger vehicles and two wheelers are anticipated to lead the way. As a caveat, with festival season round the corner and elections approaching in Bihar, the risk of Covid spread resurging may play a spoilsport in specific regions," Gulati said.
"Inventory for 2W stands at 45-50 days and PV stands at 35-40 days. Any dampener in vehicle sales during the upcoming festivals will have a catastrophic impact on Dealers financial health. We have once again advised extreme caution to both OEMs and dealers to avoid building any further inventory as this may lead to a disastrous situation similar to the last two festive seasons when sales were below the mark."
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