Overall automobile retail sales in September witnessed a decline of 9.26% YoY, according to the data released by the Federation of Automobile Dealers Association (FADA) on Monday. 

Except for three-wheelers and tractors whose sales grew 0.66% and 14.69% YoY respectively, other categories such as two-wheelers, passenger vehicles (PV) and commercial vehicles (CV) fell by 8.51%, 18.81%, and 10.45% YoY, respectively.

The two-wheeler sales declined by 10% Month on Month (MoM’) and 8.5% YoY due to low consumer sentiment, poor inquiries, and reduced walk-ins. Seasonal factors like the Shraddh period, Pitrapaksha, and heavy rains further impacted demand, resulting in delayed purchases and a subdued market environment, FADA said. 

Three-wheeler sales showed marginal growth of 0.99% MoM and 0.66% YoY, driven by positive customer engagement and increasing demand for e-rickshaw options. However, overall demand remained subdued as many customers deferred purchases in anticipation of the upcoming festive season and heavy rains impacted walk-ins and sales activity, FADA added.

CV sales increased by 1.46% MoM but declined by 10.45% YoY, reflecting mixed performance. While there was positive sentiment and marginal growth in regions supported by infrastructure projects, overall demand remained weak due to low government spending, extended monsoon delays and seasonal challenges. Despite some improvement in fleet purchases, the market conditions remain subdued, it further said.

“In the PV category, sales plummeted by 10.8% MoM and 18.81% YoY, signalling an alarming trend of declining consumer demand and deteriorating market sentiment. Seasonal factors such as Shraddh and Pitrapaksha, coupled with heavy rainfall and a sluggish economy, have exacerbated the situation,” it pointed out. This is the 4th consecutive month that PV sales have declined. 

C S Vigneshwar, President, FADA in a statement said, “Despite the onset of festivals such as Ganesh Chaturthi and Onam, dealers have reported that the performance has been largely stagnant. This suggests that overall market sentiment during these festive periods has been underwhelming, with a trend leaning towards flat or negative growth,” he added.

“The Shraddh period further impacted sales negatively, leading to a YoY decline in retail sales across various categories. Discounts and offers have been introduced across segments to stimulate demand, but these have yet to translate into a significant improvement in sales,” he added. 

The Finance Ministry in its monthly economic review for August had stated “There are also incipient signs of strains in certain sectors. For instance, the automobile dealers’ body, FADA, has pointed to moderating sales of passenger vehicles and a build-up of inventory.”

“Data from Nielsen IQ indicated that the growth of fast-moving consumer goods sales in urban areas slowed in Q1 FY25. While these may turn out to be transient with the onset of the festival season, they warrant monitoring,” the ministry had said. 

According to FADA PV dealers facing all time high inventory levels of 80-85 days, equivalent to 7.9 lakh vehicles worth ₹79,000 crore.

Considering this the Federation has urged the Reserve Bank of India (RBI) to issue stricter guidelines on channel funding policies to mitigate the possible financial risk faced by dealers. 

“PV dealers [are] facing all time high inventory levels of 80-85 days, equivalent to 7.9 lakh vehicles worth ₹79,000 crore due to aggressive OEM dispatches. Dealers are under financial pressure, with increased cash flow challenges,” FADA said in a statement.

“FADA urges the RBI to issue stricter guidelines on channel funding policies to mitigate the financial risk faced by dealers,” it added. 

It said RBI should issue an advisory to banks, mandating stricter channel funding policies based only on dealer consent and on actual collateral, to prevent dealers from facing additional financial pressure due to unsold stock. 

Given the critical festive season around the corner, FADA has urged OEMs to take immediate corrective measures to avoid a financial setback. 

“This is the final opportunity for PV OEMs to recalibrate and support market recovery before it’s too late,” it flagged. 

While both Navratri and Diwali falling in the same month and improved crop yields are expected to uplift sales, high inventory levels in PV segment present a risk if October sales do not meet expectations, putting pressure on dealers as well as OEMs.“Heavy discounts and offers might impact dealer profitability if sales do not pick up during the festive period,” FADA said. 

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