Low Demand Continues To Take A Toll On Auto Retail Sales In May 2019

The Indian auto market has been bearing the brunt of several new regulations which have been impacting customer sentiments and as a result, sales across the industry are subdued. In line with the retail sales data issued by SIAM last week, Federation Of Automobiles Dealer’s Association (FADA) has reported a decline of 1 per cent in passenger vehicles’ (PV) sales in the month of May. Carmakers retailed 251,049 units in May 2019 as compared to 253,463 units which were retailed in the same month last year.

Commenting on May 2019 sales performance, F A D A President, Ashish Harsharaj Kale said, “Even though on MoM basis, there was an uptick in Vehicle Registrations, all categories of Vehicles de-grew when compared on YoY basis. It should also be noted that May last year had a very high base and had witnessed 2nd highest registrations on a monthly basis in the last fiscal.” The slowdown in demand has also lead to accumulation of inventory at the dealership which is only likely to continue on the advent of new safety and emission norms coming in. Hence, prominent Indian carmakers like Maruti Suzuki and Mahindra have taken the production cut route in a bid to keep a check on stock build up. In fact, it’s only due to de-stocking that SIAM has reported a decline of 20.55 per cent in sales in May 2019. Speaking on the same lines, Kale added, “High Inventory at this juncture is an Added Liability on the Auto Dealers especially when the current environment is witnessing Negative Sales Growth combined with Extremely Tight Working Capital Availability for the Auto Retail Sector. We acknowledge and appreciate the Steps taken by Most of Our Principals for moving towards new Inventory Norms for Sustained Dealer Survival and Profitability.”

Bottlenecking in cash flow and low availability of credit are among other principal factors which have dented sales across segments and two-wheelers have taken a massive blow of these headwinds. Demand in rural markets also has been dwindling and the two-wheeler segment has witnessed a slump of 8.6 per cent which is the highest of segments. 14,07,361 units of motorcycles and scooters were sold in May 2019 against 15,40,377 units which were sold in May last year. The shock waves also took over the commercial vehicle (CV) segment which reported a de-growth of 7.8 per cent selling 62,551 units as compared to 67,847 units sold in the same month last year. Three wheelers segment too reported a de-growth of 4.0 per cent selling 50,959 units against 53,108 units which were sold in May 2018. Over retail sales across segments in May 2019 in the Indian auto market stood at 17,71,920 units as compared to 19, 14,795 units in May last year which is a decline of 7.5 per cent.

Now finally speaking on the outlook, SIAM and FADA both are betting on pre-buying which are likely to happen on the onset of BS6 norms. However, automakers would require giving discounts in a bid to liquidate old stocks and push pre-buying which can help the industry make through the tough time.

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