Auto sale picks up in Feb but negative outlook for March over Coronavirus

Auto retail sales grew by 2.6 per cent with 17,11,711 units sold in February as compared to 16,68,268 units, a year ago. The sector is returning to green as dealers attribute the development to emphasis on liquidation of BS-IV stocks and rural sales going up. Meanwhile, the Coronavirus outbreak has led to a negative outlook for March. 

Dealers are facing a new challenge with the Coronavirus cases being detected in India and an alarming drop in customer walk-ins in auto showrooms. The overall uncertainty of the situation due to COVID-19 and the huge drops in the share markets has contributed to the already weakened sentiment as purchase decisions are getting postponed. BS-VI Vehicles Supply is also affected due to the outbreak in China and an already difficult transition becomes more difficult due to unexpected developments.

Meanwhile, three-wheeler vehicles reported the highest growth at 20.70 per cent to 65,752 from 54,474 units, followed by tractors which jumped 13.52 per cent to 41,485 units as compared to 36,543 units. Commercial vehicle sales was up by 13 per cent to 92,805 units from 82,129 units and two-wheeler sales grew by 1.52 per cent to 12,85,398 unis from 12,66,163 units.

Passenger vehicle sales was the only segment which reported a decline in sales, which stood at 2,26,271 units as compared to 2,28,959 units, a drop of 1.17 per cent.

 

Ashish Harsharaj Kale, President of Federation of Automobile Dealers Associations (FADA) said, "February turned positive for retail sales for most of the Segment as the entire auto ecosystem, especially auto dealers, focussed on liquidation of their BS-IV Stocks. Rural sales also contributed with tractors being in double-digit growth for the second month in a row."

Despite YoY Growth, the overall retail sales were much below expectations as the expected pre-buying for the BS-IV stocks was not seen. Many Customers held onto their purchase decision expecting sweeter deals towards the end of March, Kale added.

On the inventory front, he said that two wheeler inventory of BS-IV Vehicles remains a very serious concern for dealers. With the Supreme Court not considering FADA's application for sale extension for BS-IV, the association urged the two-wheeler makers to handhold the dealers for 100 per cent liquidation of their BS-IV stocks.

"A large number of two-wheeler dealers will not be able to fully liquidate their BS-IV inventory and expressed inadequate support from their OEMs for 100 per cent liquidation of this stock," Kale said.

With regards to passenger vehicles and commercial vehicles, the overall inventory is at a reasonable level but the challenge remains in slow-moving, non-popular models as dealers look for adequate OEM support for liquidation of the same in the month of March. FADA has already advocated for return of unsold BS-IV Stocks and will be pursuing this for its members, if the need arises, as many dealers will be unable to sustain such losses, he added.

On the outlook, he said, with Banks & NBFC’s getting into a cautious mode with regards to financing BS-IV stocks and many RTO’s across the country prescribing their own cutoff dates for permanent registration, retails of 100 per cent of dealer inventory of BS-IV stocks continue to be a challenge.

FADA urged the Centre for a relief package for the slowdown-hit industry with a temporary reduction in GST.