Automobile sales in India drop 9.26% YoY in September as PV dealers face record-high inventory levels: FADA

According to FADA, the festivals of Ganesh Chaturthi and Onam failed to stimulate demand as anticipated.

Two-wheeler retail sales dropped by 8.51 percent year-on-year (YoY), which FADA attributed to weak consumer sentiment, fewer inquiries, and delayed purchases caused by heavy rains and seasonal factors like Shraddh.

Passenger vehicle sales experienced a sharp 18.81 percent decrease compared to the previous year, while commercial vehicle sales fell by 10.45 percent YoY.

The commercial vehicle segment showed only slight month-on-month growth of 1.46 percent, indicating sluggish market conditions and reduced government spending, according to FADA's report.

Additionally, passenger vehicle dealers are grappling with record-high inventory levels of 80-85 days, equivalent to 7.9 lakh vehicles worth Rs 79,000 crore, due to aggressive dispatches from manufacturers.

FADA noted that dealers are under significant financial strain, facing cash flow challenges.

"The southwest monsoon in 2024 recorded 8 percent above-normal rainfall, which disrupted auto retail in several regions, dampening demand and foot traffic," FADA added.

The association also urged the Reserve Bank of India (RBI) to implement stricter regulations on channel funding policies to reduce the financial risks dealers are encountering.

As the crucial festive season approaches, FADA called on original equipment manufacturers (OEMs) to take immediate action to prevent financial setbacks.

FADA President CS Vigneshwar emphasized the need for the RBI to issue an advisory to banks, mandating stricter channel funding policies based on dealer consent and actual collateral, to help dealers avoid further financial strain from unsold inventory.

Vigneshwar stressed that this is the last chance for OEMs to adjust their strategies and support the market recovery before it’s too late.

Looking ahead, FADA expects the upcoming festive season, which includes both Navratri and Diwali in the same month, to boost sales.

Favourable agricultural conditions due to good monsoon and better crop yields are also expected to drive rural demand for two-wheelers, passenger vehicles, and tractors in the near future.