Retail auto sales in August dip 27%, hurt hopes of strong rebound

The decline was relatively modest compared to the 25 per cent year-on-year dip in July but in stark contrast to the 20 per cent growth in wholesale that was dispatched by manufacturers from their factories to their respective dealerships

Retail sale of automobiles witnessed a sharp 27 per cent decline in August over last year, dampening the narrative built by car and two-wheeler companies of a robust recovery in the domestic market.

Figures collated by Federation of Automobile Dealers Association (FADA) showed passenger vehicle sales were down over 7 per cent last month at 178,513 units. The decline was relatively modest compared to the 25 per cent year-on-year dip in July but in stark contrast to the 20 per cent growth in wholesale that was dispatched by manufacturers from their factories to their respective dealerships. The retail figure that represent actual sales at dealerships was over 55,000 units lower than despatches indicating inventory build-up in the run up to the upcoming festive season.

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"Overall demand is still not back to pre-COVID levels as banks and NBFCs continue to have a cautious approach towards funding," said Vinkesh Gulati, president, FADA. "While OEM's are dispatching vehicles to dealers with a purpose of stocking-up inventory for the upcoming festival season, retail sales are still at 70-75% levels despite the low base of last year. We advise extreme caution to all OEMs and our Dealer fraternity to avoid excessive Inventory build-up thus leading to unmanageable interest cost which could further result in dealership closures."

In two-wheelers that comprise the biggest chunk of volumes in the overall industry, sales were down nearly 29 per cent at 898,775 units. Commercial vehicle sales were down nearly 58 per cent and three-wheelers declined nearly 70 per cent. Yet, FADA said there were some encouraging signs of demand returning in the market.

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"Passenger vehicles after five months saw decline reducing to single digit. Customers who were sitting on the fence, finally concluded their purchase during ongoing festivals of Janmashtami and Ganesh Chaturthi. Entry level Passenger Vehicles were in high demand as personal mobility is being preferred with current pandemic showing no signs of reduction," Gulati said. "With the start of festival season and the Government's continued effort to open up India, the month of August saw good numbers when compared to immediate previous months. August also saw an arrest in decline and pullback efforts on all fronts were visible, though on year on year, all categories except tractors continued to fall, though at a slower pace."

As has been the case over the last few months, spurred by the rural markets, tractors provided the only silver lining with a 28 per cent growth during the month at 67,406 units.

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