Rural Demand Aided Retail Auto Sales In June, Says Dealers’ Lobby
An auto manufacturing unit. (Photographer: Udit Kulshrestha/Bloomberg)

Rural Demand Aided Retail Auto Sales In June, Says Dealers’ Lobby

Retail sales of cars and two-wheelers improved in June, the first full month of economic activity after an extended nationwide lockdown, aided by a recovery in rural demand.

Vehicle registrations, a measure of auto sales at dealerships, rose to 984,395 units in June from 202,697 units in May, according to data released by the Federation of Automobile Dealers Associations.

On a year-on-year basis, however, retail sales fell 42% in the reported month. All segments, barring tractors, witnessed a decline.

“Unlock 1.0, coupled with an increase in demand from the rural market, has boosted the retail sales with respect to May’s numbers,” said Ashish Kale, president at the automaker dealers’ lobby. “At the end of June, almost 100% dealership outlets (showrooms and workshops) were operational across the country, barring a few cities and towns that once again implemented stringent lockdown.”

The rural market, led by a robust crop output and timely arrival of monsoon, has witnessed a recovery in demand compared with urban areas, Kale said. That drove retail sales of tractors, two-wheelers and small commercial vehicles.

India’s automakers have been trying to push sales since the Diwali festival season in 2018. First, an increased upfront insurance cost, coupled with a broader consumption slowdown and disruptions caused by BS-VI emission norms, hurt sales. Then the recent nationwide lockdown to combat the Covid-19 pandemic completely stalled operations at companies and dealerships. But as the lockdown curbs are eased, while retail sales picked up, wholesales continue to lag.

Also, dealers don't see a reason to cheer just yet.

“Overall weak economic sentiments, coupled with rising number of Covid-19 patients, have led to weak consumer confidence, especially in tier-I cities. That’s because customers stopover from concluding their purchase amid fears of community spread [of infections] and a return of complete lockdown,” Kale said. “June registrations, although better than May, is still not indicative of the actual demand situation as lockdown woes continue in some parts and supply side is far from its complete potential.”

The dealers' lobby doesn't expect normalcy to return before the festival season. “Overall auto demand continues to be a challenge, coupled with supply-side constraints and constraints in retail lending from NBFCs, but normalcy in demand still seems quite distant."

FADA projects sales to contract 15-35% across segments, barring tractors, in the financial year ending March 2021.

(With inputs from Nishant Sharma)

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