There is angst in automobile land. Sales are continuing their southward march, and the festive season, so far at least, has not been kind.
Sales in September, a month in which the festive season was in top gear in the south and west of the country with Ganesh Chaturthi and Onam, has not been inspiring. Figures released by the Federation of Automobile Dealers (FADA) on Monday morning reveal that there has been a significant decline of overall automobile sales by 9.26 per cent.
Even worse, the low sales, coupled with auto manufacturers churning out vehicles at a fast pace, has seen inventory worth Rs 79,000 crore stuck with vehicle dealers across the country.
FADA estimates that the inventory level of 80-85 days, equivalent to 7.9 lakh vehicles, is an all-time high record. “Dealers are under financial pressure, with increased cash flow challenges,” said a note by FADA.
Given the critical festive season around the corner, FADA urges OEMs to take immediate corrective measures to avoid a financial setback,” said FADA president C.S.Vigneshwar, “FADA also calls on the Reserve Bank of India to issue an advisory to banks, mandating stricter channel funding policies based only on dealer consent and on actual collateral, to prevent dealers from facing additional financial pressure due to unsold stock. This is the final opportunity for PV OEMs to recalibrate and support market recovery before it's too late!”
While bike and scooter sales tanked nearly 9 per cent, more worrying has been the crash in the sales of cars, and that recent-years poster boy, the SUV — PV sales fell steeply by nearly 19 per cent. Commercial vehicles also joined the plummeting parade, falling 10.45 per cent, though there is a glimmer of hope here, since sales went up 1.46 per cent compared to the previous month.
The reasons are too far to seek. While the monsoon has been above normal, the unseasonably long rainfall periods and heavy downpours meant it affected vehicle demand and walk-ins at vehicle showrooms. Seasonal factors like Shraddh, considered an auspicious period in North India when people do not make any purchase, has also been a factor.
But the worrisome factor is that peak festivals like Onam, big in Kerala, as well as Ganesh Chaturthi in places like Maharashtra and Tamil Nadu, failed to ignite demand in those regions. Now all hope is on Navaratras and the ensuing run-up to Diwali, when most of India splurges on something or the other.
Auto makers and dealers will be fervently hoping that is the case. They are already buoyed by the favourable agricultural conditions due to the good monsoon, and hope it will spur demand for two-wheelers and tractors, especially in rural areas.
“A successful October is essential to clear out excess inventory and set a positive growth trajectory for the remainder of FY25,” said a note issued by FADA, “With rising inquiries and optimistic Dealer sentiments, the outlook leans towards optimism, but high stakes and dependency on October’s performance warrant a cautious approach.”
