Rain, rain, go away, come again another day. It is ironic that it is one of India’s growth poster boy sectors that is chanting this rhyme. Even more ironic that they were pinning all their hopes during the downturn of the summer on a good monsoon.
As the Federation of Automobile Dealers (FADA) released the auto sales figures for the month of August on Thursday morning, it was clear that the warning trends were correct — sales of both cars and two-wheelers have both tumbled.
While passenger vehicles (cars, SUVs etc) dropped 4.53% year-on-year and 3.46% compared to July, the drop was sharper for commercial vehicles, often a bellwether for the state of the nation’s economy — they fell 8.5% compared to even July, also a rain-heavy month, and compared to last year, the drop was more than 6%.
Two-wheelers fell 7.29% compared to July, and that is not good news for the government, because it shows that farmers and the rural economy are not comfortable enough to spend — meaning the fear over rural revival still persists.
This has prompted FADA to raise an SOS, calling for easier loans so that sales can be revved up. FADA President, Manish Raj Singhania, said, “In August, India witnessed 15.9% excess rainfall across the country, with northwest India seeing a surplus of 31.4%, 7.2% in the east and northeast, 17.2% in central India and a minor deficiency of 1.3% in the peninsular region. This monsoon season brought unpredictable weather, starting with extreme heat waves which delayed monsoon and transitioned into heavy rainfall, leading to flood-like conditions in several areas.”
This has obviously had a direct impact on consumer confidence, coming as it does after a scorching summer and a long-drawn out election period.
Making matters worse is the high unsold inventory with dealers across the country, nearly 8 lakh vehicles worth more than 77,000 crore rupees.”Dealers (are) under pressure due to aggressive OEM dispatches, with dealers facing cash flow challenges and reduced profitability,” said a note released by automobile dealers.
While the festive season starting, first with Ganesh Chaturthi followed by Onam this month, is something to look forward, there are some very real fears. One, is whether the excess rainfall has affected the Kharif crops nearing harvest. Other is the Shraddh period, a nearly two-week inauspicious period as per Hindu beliefs, when people don’t indulge in shopping or spending money.
