Automotive retail sales in September show signs of return to the path of normalcy

The Federation of Automobile Dealers Associations (FADA) released the monthly vehicle registration data for September 2020. The automotive industry retailed 1,344,866 units across segments (2Ws, 3Ws, CVs, PVs and tractors), which was down 10.24 percent YoY, but a healthy 11.66 percent growth over August 2020.

Commenting on the monthly performance, Vinkesh Gulati, president, FADA said, “With the government’s persistent effort to unlock India, the month of September continued to witness automobile registrations on a rise as compared to previous months. Passenger vehicles for the first time saw positive growth coming back on YoY basis. With social distancing on customer’s mind coupled with government’s push to further normalise business conditions and banks becoming more considerate to finance vehicles, entry level passenger vehicles saw good demand thus indicating a preference for personal transportation over public. New launches and vehicle availability played their part as catalyst. A lower base during last FY also helped the cause.”

In terms of segment-wise sales the tractor industry continues its dream run as Kharif sowing witnessed record progress of area covered till date when compared to last year. Gulati expects with good Rabi season resulting in good disposable income, rural market also saw its rub off effect on two-wheeler, small passenger vehicles and small commercial vehicles. Overall, two-wheeler, three-wheeler, and commercial vehicles continued to march ahead on MoM basis and inched up to narrow their gap with last year’s sale even though pre-Covid levels are yet to be seen across all categories.

FADA states that while recently, the economic revival was mostly limited to rural India and impact of Covid-19 was still felt on larger states and urban centres, the top states which make up half of India’s economic output (Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Gujarat and West Bengal) have now started showing signs of revival as economic activities in these states are at its peak since lockdown began in March. This has also helped in creating a demand for automobile sales.

Festive season to further enable high-growth
The month of October and November brings with itself the much-awaited festival season of Navratri, Durga Puja and Diwali. With no more lockdown announced by the Central government, FADA anticipates a high growth period during these two months for automobile sales in the country.

In addition, the government’s consideration to waive off interest on interest during moratorium up to Rs 2 crore will further help in improving customer sentiment thus making them conclude vehicle purchase decisions during the festivities.

As regards finance, with Banks and NBFCs also gearing up with various festival offers to woo retail customers, auto sales are expected to witness a renewed growth and may close at par with last year. Passenger vehicles and two-wheelers are anticipated to lead the way.

On the other hand, as a caveat, with festival season around the corner and elections approaching in Bihar, FADA says the risk of Covid spread resurging may play a spoilsport in specific regions.

The dealer fraternity body cautions that at present, the inventory for two-wheeler stands at 45-50 days and passenger vehicle at 35-40 days. Any dampener in vehicle sales during the upcoming festivals will have a catastrophic impact on dealers financial health.

FADA has once again advised extreme caution to both OEMs and the dealers to avoid building any further inventory as this may lead to a disastrous situation similar to the last 2 festive seasons when sales were below the mark.

Also read: India auto retail market sees inventory build-up in September