Auto dealers see no quick recovery in slowdown, pin hope on stable govt

Liquidity crisis, weak sales have increased inventory for dealers, says date released by dealers association.

The retail sales of vehicles across segments declined significantly by 8 per cent year-on-year (YoY) to 1,638,470 units in April, as political uncertainty before the general election results and continued lack of financing options due to the liquidity crunch in non-banking financial companies (NBFCs) kept potential customers away from showrooms, the data released by the Federation of Automobile Dealers Associations (FADA) showed.

Showroom sales of passenger vehicles--a bellwether of urban demand--declined 2 per cent to 242,457 units, when compared to 247,278 units sold in the corresponding month in 2018-19.

The modest decline in passenger vehicles sales come on the back of a double-digit decline in April wholesale dispatches reported by companies on May 1. Maruti Suzuki India — the country’s largest vehicle manufacturer — reported 20 per cent (it was 19.6)  drop in sales to 133,704 units, while the second-largest manufacturer, Hyundai Motor India, saw volumes decline 10 per cent, and the third largest, Mahindra & Mahindra, also decreased vehicle dispatches by 9 per cent during the month.

Essentially, this means retail sales of automobiles, especially in the passenger vehicle segment, did improve sequentially, as vehicle manufacturers reduced production of vehicles.

On the other hand, owing to the slowdown in economic activity, reflected in the reduced gross domestic product growth numbers and lack of availability of finance from NBFCs after the bankruptcy of Infrastructure Leasing & Financial Services, and slow transmission of repo rate cut by the Reserve Bank of India on vehicle loans, commercial vehicle sales saw a 16-per cent decline YoY to 63,360 units.

The new truck axle norms, which allow trucks to carry more freight, also had an adverse impact on retail sales.

Ashish Harsharaj Kale, president, FADA, said April ended on a negative note across all segments, when compared with the corresponding months.

 “The near-term outlook continues to be negative, with the absence of any immediate positive triggers, which could affect retail sales. Despite subdued retail sales, which are expected to continue for the next eight to 12 weeks, we still believe that the outlook for auto retail can soon turn positive if there is a stable government, healthy monsoon, and easing of the liquidity situation,” added Kale.

Increased cost of ownership due to hike in insurance cost and subdued demand in the rural and urban areas led to a 9-per cent YoY decline in sales of motorcycles and scooters to 1,285,470 units in April.

According to the survey conducted by FADA among its members, the average inventory with passenger vehicle dealers ranges between 40 days and 45 days, while the same for two-wheelers has come down to 40-45 days, from 85-90 days in February. The average stocks of commercial vehicles with dealers are also in the same range.