Passenger vehicle retail sales plunged by 19 percent in September, primarily influenced by seasonal factors like heavy rainfall and the ‘Pitru Paksha’ or ‘Sharadha’ period—a 16-day lunar phase when many refrain from making new purchases.
This significant year-on-year (YoY) decline in sales further aggravated an existing issue in the sector: inventory accumulation. Dealer stock levels surged to an all-time high of 80-85 days, equivalent to 790,000 vehicles valued at Rs 79,000 crore.
In August, there were 780,000 automobiles with a total value of Rs 77,800 crore, with an inventory level of 70–75 days.
These latest figures were shared by the Federation of Automobile Dealers Associations (FADA) in its monthly report released on Monday.
Despite this, FADA expressed a cautiously optimistic outlook for the near future, pointing to the overlap of Navratri and Diwali in the same month, which is expected to drive a spike in vehicle sales.
However, the association also issued a word of caution regarding potential challenges ahead.
With the crucial festive season approaching, FADA has called on original equipment manufacturers (OEMs) to take swift corrective actions to prevent financial setbacks.
Additionally, FADA urged the Reserve Bank of India (RBI) to issue an advisory to banks, recommending stricter channel funding policies based on dealer consent and actual collateral. This step is aimed at protecting dealers from added financial strain caused by unsold inventory.
FADA President C.S. Vigneshwar said, “This is the last chance for OEMs to refocus and aid in the market’s recovery before it’s too late.
Interestingly, overall retail sales in September dropped by 9.26 percent, with most categories, except three-wheelers and tractors, showing a sharp decline compared to the same period last fiscal year. Two-wheelers and commercial vehicles fell by 9 percent and 10.45 percent, respectively, in addition to the significant drop in passenger vehicle sales. In contrast, three-wheelers posted a modest increase of 0.66 percent, and tractor sales rose by 15 percent during the month.
Among carmakers, Maruti Suzuki’s sales dropped by 20 percent to 1,41,318 units, while Hyundai Motor India saw a 25 percent decline, and Tata Motors dropped by 19 percent. However, Mahindra and Mahindra saw a slight increase of 0.4 percent, surpassing Tata Motors to become the third-largest player.
“Despite festivals like Ganesh Chaturthi and Onam, dealers reported stagnant performance, suggesting a flat or negative growth trend during this festive period,” said C.S. Vigneshwar, President of FADA.
“The Shraddh period had an adverse effect on sales as well, causing a fall in several categories year over year. Discounts and offers have been introduced across segments to boost demand, but these efforts have yet to yield a notable improvement in sales,” he added.
However, Vigneshwar expressed optimism about the upcoming festivals potentially boosting sales.
He pointed out that the ample water levels in reservoirs and better crop yields are likely to drive rural demand, making the festive season a key opportunity for a substantial rise in two-wheeler, passenger vehicle, and tractor sales, especially with new product launches scheduled. However, he also emphasized that the passenger vehicle segment is in a delicate situation because of the high inventory levels at dealerships.
He further warned that if sales don’t pick up as expected in October, dealers could face considerable financial strain from unsold stock piling up. While both dealers and OEMs are banking on strong festive sales, particularly in rural areas where positive cash flow and better agricultural conditions are expected to spur demand, the outcome is still uncertain, Vigneshwar cautioned.