Sales Continue To Decline In July, Says Auto Dealers Associations

Auto sales continued to decline at dealerships in July even as inventories remained unchanged for two-wheelers and commercial vehicles.

Retail auto sales, measured by vehicle registrations, dropped 5 percent and 11 percent year-on-year for two-wheelers and passenger vehicles in July, respectively, according to data released by Federation of Automobile Dealers Associations. For commercial vehicles, the slump was even worse with registrations falling 14 percent over the previous month—the most across all categories—compared to the year-ago period.

Consumer sentiment and overall demand continued to be quite weak across all segments and most geographies, FADA President Ashish Harsharaj Kale told BloombergQuint.

Some respite, however, was seen in month-on-month numbers which was mainly due to the revival of monsoon and low base in June, Kale said. “With June being a completely dry and rain deficient month, consumer sentiment was at its lowest, and with July rains covering up a lot of the deficit, some confidence in consumer demand led to pending purchase conclusion in July.”

But despite these factors, commercial vehicle sales continued to be negative even on a monthly basis, he said.

The auto industry has been struggling to push sales since the festive season last year. Increased upfront insurance costs and higher fuel prices kept buyers away. Discounts, too, failed to lift demand, forcing automakers to cut production as inventory piled up.

Inventory levels remained largely unchanged in case of two-wheelers and commercial vehicles. “The high levels of inventory in two-wheeler segment is a serious concern and threatening the financial viability of many dealers, while negative double-digit de-growth in commercial sales gave little room to dealers to reduce inventory,” FADA said in its press release.

According to FADA, these were the average inventory levels in July:

• Passenger vehicles: Down to 25-30 days from 30-35 days in June
• Two-wheelers: 60-65 days (same as June)
• Commercial vehicles: 55-60 days (same as June)

Outlook

Going forward, the dealer community is hopeful of pick up in sales. “We are hopeful that the postponement in sales over the previous months and rising enquiries should result into eventual conversion into sales on account of revival in monsoon, improved liquidity and a subdued fuel price,” Vinkesh Gulati, partner at United Automobiles, told BloombergQuint.