Auto sales in August to be 'far worse' than July, analysts expect 30% fall

The slowdown nightmare for the automobile industry is expected to continue for August as analysts estimate an overall sales downfall of up to 30 per cent.

In a survey conducted by IANS, industry experts were quick to point out that August will be far worse in sales than July, especially due to havoc caused by Monsoon rains across India.

They estimated that sector might face an overall sales downfall of up to 30 per cent on a year-on-year basis, with passenger vehicle segment being the worst hit.

Interestingly, this year August came just ahead of the festive season and before the slew of growth inducing measures announced by the government.

 

"The turnaround in the industry is months away since any of the measures recently taken to deal with the sales slowdown or to prop-up consumer sentiment will take time to bring a turnaround," Grant Thornton India LLP Partner, Sridhar V. told IANS.

"All in all, August seems to be a similar or even worse sales glide path than July."

At present, the sector has been impacted by a consumption slowdown which is a culmination of several factors like high GST rates, farm distress, stagnant wages and liquidity constraints.

Besides, inventory pile-up at the dealership level and stock management of unsold BS-IV vehicles have become a problem for the sector.

Consequently, the industry's production levels have also receded as demand plunged, eventually leading to job losses.

These factors led the Finance Minister last week to come out with a major economic booster package.

"There might not be any major improvement in August sales numbers on the back of government's recent measures to improve liquidity and to revive demand, however, as months progress and we come closer to the main festive season (October) there might be some turnaround," Snehdeep Bohra, Associate Director with Fitch Ratings told IANS.

Lately, all major OEMs consisting of passenger, commercial, two and three wheeler manufacturers have reported a massive decline in domestic sales.

Figures from the Society of Indian Automobile Manufacturers (SIAM) showed that industry which has recorded an overall decline of 18.71 per cent in off-take for July, the highest monthly sales de-growth in the last 19 years.

"Sales deferment due to upcoming festival season and monsoons combined with flooding across several parts of the country will have an impact on August sales," Rahul Mishra Principal at A T Kearney told IANS.

"Except for two-wheeler and the SUV segment temporarily supported by incentive schemes and new launches respectively, there might not be any positive improvement in August retail sales."

As per SIAM figures, domestic passenger car sales in July plunged by 35.95 per cent to 122,956 units against 191,979 units sold in July 2018.

Overall, passenger vehicle sales declined 30.98 per cent in July to 2,00,790 units against 2,90,931 units in the year-ago month. In the commercial vehicle segment, sales were down by 25.71 per cent to 56,866 units.

In case of two-wheelers, which include scooters, motorcycles and mopeds, the sale edged lower by 16.82 per cent to 15,11,692 units.

According to a research note by Motilal Oswal Financial Services: "Our interaction with leading PV or 2W or CV channel partners still indicates no signs of demand recovery at retail levels, as inquiries to sales remains tepid."

"Feedback on pre-festive demand is not very encouraging, partly impacted by floods in several parts of the country and demand deferment in anticipation of some sops from the government. Most OEMs continued their inventory cutting efforts through production cuts in August 2019."