Passenger vehicle retail sales in India saw a notable 10 per cent year-on-year (YoY) increase in July, driven by new model launches and enhanced discounts, according to the Federation of Automobile Dealers Associations (FADA). Total sales reached 3,20,129 units, up from 2,90,564 units in July 2023.
"Dealers benefited from good product availability, attractive schemes, and a wider range of products," said FADA Vice President C S Vigneshwar in a statement. Despite challenges such as heavy rains, low consumer sentiment, and intense competition, dealers sustained sales through strong promotions and incremental discounts, he added.
However, Vigneshwar pointed out that the growth comes with high inventory levels, which have surged to 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," he said.
Vigneshwar 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 NPAs.
Two-wheeler retail sales in July reached 14,43,463 units, marking a 17 per cent 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 added.
Commercial vehicle retail sales grew by 7 per cent YoY 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.
Conversely, tractor sales declined by 12 per cent YoY to 79,970 units in July.
FADA, which collected vehicle registration data from 1,568 out of 1,645 RTOs across the country, noted that the near-term outlook across the auto retail segments shows a blend of optimism and caution.
Two-wheeler sales are expected to remain strong due to factors such as a growing rural economy, positive monsoon impacts, and new product introductions. The upcoming festive season and favorable agricultural conditions are also likely to boost sales. However, heavy rainfall, ongoing agricultural activities, and inconsistent monsoon patterns may dampen demand in certain areas.
FADA indicated that the PV segment could see 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.