New launches, festive season rev up numbers but October retails remain in red

The Federation of Automobile Dealers Associations (FADA) today released the monthly vehicle registration data for October 2020. The overall retail sales came at 1,413,549 units, down 23.9 percent which includes two-, three-, four-wheelers, commercial vehicles and tractors. Interestingly, except for the tractor segment, the overall industry continued to be in the red.

Commenting on the data, Vinkesh Gulati, president, FADA said, “October continues to see positive momentum on monthly basis but on a yearly basis the negative slide continues to increase. The 9-day Navratri period witnessed robust vehicle registrations but could not save October to go in red as compared to last year when both Navratri and Diwali were in the same month.”

Gulati says while new launches continued to be in demand in passenger vehicle segment, the entry-level motorcycles witnessed a lean demand in two-wheeler segment. He said that with supply-side mismatch, most of the passenger vehicle dealers ended with limited stock of high-selling products and odd variants which did not attract much demand. In addition, there were lower discounts compared to the last festival season, which also played spoilsport.

On the commercial vehicle side, Gulati said that while SCVs is witnessing robust demand due to local goods transportation back to pre-covid levels, the M&HCV segment continued to bleed. “FADA urges the government to urgently announce an attractive incentive-based Scrappage Policy. It also requests the government to release funds for infrastructure projects which it has awarded as this will help demand generation and will lead to higher production of vehicles. The government’s continued procurement of Kharif crops at MSP from farmers is leading to a higher disposable income in rural India. This continues to show robust demand in Tractor segment which grew at a healthy 55% YoY.”

Could see supply-demand mismatch
The FADA president states that as we enter the last leg of festivals and with Covid getting into its third wave in many cities, there is a sense of cautiousness amongst customers. Due to the lockdown announced in few European countries, procurement of spares will also be a cause of hinderance for smooth supply of vehicles in Indian markets. “This will create a supply and demand mismatch thus affecting the passenger vehicle sales.”

FADA has once again cautioned both OEMs and dealers to keep a check on vehicle inventory as after the festivals, demand may remain subdued. “Since Inventory levels are at its highest during this financial year, it may impact dealers financial health thus leading closures and job losses,” concluded Gulati.

According to FADA, dealer inventory levels for both two-wheelers and passenger vehicles are at their newest highs in the ongoing fiscal year. The dealer body has urged all OEMs, particularly two-wheeler manufacturers, "to assess the on-ground inventory level and curb production accordingly."