Retail sales of passenger vehicles in India, encompassing cars and SUVs, rose by 10 per cent to 320,129 units in July compared to 290,564 units in the same month last year, according to the Federation of Automobile Dealers Associations (FADA). This growth was driven by new model launches and increased discounts.
C.S. Vigneshwar, Vice President of FADA, stated, “Dealers benefited from good product availability, attractive schemes, and a broader range of products.” Despite challenges such as heavy rains, low consumer sentiment, and intense competition, dealers managed to maintain sales through strong promotions and incremental discounts.
However, Vigneshwar highlighted that this growth came with high inventory levels, which have surged to a historic high of 67-72 days, representing an inventory value of approximately Rs 73,000 crore. “This poses a substantial risk for dealer sustainability, necessitating extreme caution. FADA urges passenger vehicle (PV) original equipment manufacturers (OEMs) to be vigilant about potential dealer failures due to these high inventory levels,” he added.
In contrast, two-wheeler retail sales in July reached 1,443,463 units, marking a 17 per cent increase from 1,231,930 units in July 2023. This segment’s robust growth is attributed to a thriving rural economy, a better monsoon, and government support programmes that have enhanced rural incomes. Vigneshwar noted that new product introductions and better stock availability also played a significant role, despite market slowdowns in some regions, excessive rains, and heightened competition.
Commercial vehicle (CV) retail sales grew by 7 per cent year-on-year to 80,057 units last month. Positive factors included growth in the construction and mining sectors. Nonetheless, challenges such as continuous rainfall, negative rural market sentiment, poor finance availability, and high vehicle prices were also observed.
Tractor sales declined by 12 per cent year-on-year to 79,970 units in July. FADA, which gathered vehicle registration data from 1,568 out of 1,645 RTOs across the country, noted that the near-term outlook for the auto retail segments presents a blend of optimism and caution.
Two-wheeler sales are expected to benefit from a growing rural economy, positive monsoon impacts, and the introduction of new products. The festive season, starting after the Aadi festival, and favourable agricultural conditions are also likely to boost sales.
Conversely, heavy rainfall and inconsistent monsoon patterns may dampen demand in certain areas. FADA suggested that the PV segment might experience mixed results in the near term. High inventory levels remain 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 has a modest outlook, with improved market reach and the festive season being positive factors, but challenges such as poor freight rates and ongoing rainfall present risks, FADA concluded.
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