The Federation of Automobile Dealers Associations (FADA) today released the monthly vehicle registration data for February 2020, which saw overall sales of 1,711,711 units across the industry (2Ws, 3Ws, PVs, CVs and tractors), up 2.6 percent compared to the same period last year. In comparison, the overall sales dropped 2.19 percent compared to the retail sales in January 2020.
Commenting on the result, Ashish Harsharaj Kale, president, FADA said: “February turned positive for retail sales for most of the segment as the entire auto ecosystem, especially auto dealers, focussed on liquidation of their BS-IV stocks. Rural sales contributed for retail sales turning green with tractors also being in double digit growth for the second month in a row."
On the other hand, while the numbers gives a positive indication initially, it is interesting to note that despite the YoY growth, the overall retail sales were much below expectations as a more robust auto retail sales were expected on the back of BS VI pre-buying. FADA believes that many customers held onto their purchase decision expecting sweeter deals towards end-March.
The auto retail body states that in terms of inventory, the two-wheeler inventory BS IV vehicles remains of "very serious concern", with the Supreme Court not providing extension for the sale of unsold BS IV vehicles, FADA seriously urges "2W OEM’s to handhold the dealers for 100 percent liquidation of their BS IV Stocks. FADA survey reveals a very high number of 2W dealers will not be able to fully liquidate their BS IV inventory and expressed inadequate support from their OEMs for 100% liquidation of this stock."
The PV and CV inventory is found to be at a reasonable level, but challenge still remains for the slow moving, non popular models. Dealers are looking at OEM support for liquidation of the same in the month of March, for which FADA has already advocated for return of unsold BS IV stocks and will be pursuing this for its members, If the need arises, as many dealers will be unable to sustain such losses.
Clearing unsold BS IV inventory remains a challenge
The dealer body says that with banks and NBFC’s being in a "cautious mode" for financing BS IV stocks and many RTO’s across the country prescribing their own cut off dates for permanent registration, clearing the complete dealer inventory of BS IV stocks continues to remain a challenge. Kale says that "Dealers are now facing a new challenge with Corona virus cases being detected in India and the alarming drop in customer walk-ins in auto showrooms. The overall uncertainty of the situation due to Corona virus and the huge drop in the share markets, further contributes to the already weakened sentiment as purchase decisions are postponed."
What's more, supply of BS VI vehicles is also affected on the back of the Corona virus situation in China and an already difficult transition becomes more difficult due to the unexpected happenings all around. Due to all this, the outlook for March is Negative.
Kale says FADA would once again very seriously urge the government to look towards a relief package for the auto industry with temporary reduction in GST till return of stability and a financially attractive 'Scrappage Policy', which will not just reduce pollution on roads of older vehicles, but will also help in reviving CV Sales which currently are the "Worst Hit."
He believes the positivity that revival in auto retail sales will have a positive impact on many sectors, which are dependant or connected to the auto ecosystem and it can trigger the "return to positivity for the overall economy".