Auto retail registration slumps the most in December: FADA

The Federation of Automobile Dealers Associations' registration data for December 2019 dropped 15 percent to 1,606,002 vehicles sold across segments YoY (December 2018: 1,880,995 units).

According to the December data, commercial vehicles reported the highest drop in retail sales at 67,793 units (-21% YoY), while two-wheeler sales came at 1,264,169 units (-16% YoY) and passenger vehicles at 215,716 units (-9% YoY).

The retail body says that after witnessing two months of positive sales on the back of festive season in October and November, auto sales once again fell in December. In fact, according to FADA, the de-growth in the last month of 2019 is the highest degrowth in FY2020. The retail body says it shares its concern on falling auto sales and has shifted its stance to 'Very Cautious' for the near and mid-term as the industry gears towards BS VI transition.

Commenting on the data, Ashish Harsharaj Kale, president, FADA said: “December sales de-growth was not on expected lines as the inquiry levels all through the month were quite robust. Consumer sentiment continues to be very weak as customers did not conclude on the purchase even after taking the efforts of inquiring and despite the best offers being available."

The slowdown in sales is said to have 'denied' dealers an opportunity to reduce BS IV inventory, which makes the transition to BS VI trickier. On the back of a weak consumer sentiment FADA says it has recommended a 'Very Cautious' approach to its members and a serious focus on BS IV inventory liquidation.

The retail body says it is working towards seeking relief from the Supreme Court for the BS IV inventory as with such weak consumer demand the near term retail sales are unpredictable, making it extremely difficult for dealers to continue the current business and also ensure a zero BS IV inventory on of March 31, 2020.

Kale says that in terms of inventory, although there was a slight reduction across all segments, the CV and 2W inventory still remains a concern, especially looking at the transition and the current weakness in demand. On the other hand PV's for the first time is in recommended range of three-weeks, a welcome move by the retail body. Liquidity still remains a concern for the industry as well as for the retail customer as banking and finance industry continues to be in cautious mode despite sufficient liquidity being available.

FADA says that in addition to the measures undertaken by the government in terms of increasing demand, an equal importance needs to be given to availability of reasonably liberal credit as the auto industry growth is driven by first time buyers or individuals and businesses looking to expand beyond their current capacity.