Auto retail sales in India contracted at a double-digit pace in August 2024, primarily due to heavy rainfall this monsoon season, according to a report recently released by the Federation of Automobile Dealers Associations.
The total retail auto sales were down 7.01 percent MoM. Sales decreased from 20.34 lakh units in July to 18.91 lakh units in August. Still, this was a nominal 2.88 percent YoY growth over August 2023.
It blamed excessive rainfall, particularly in key regions at 15.9 percent over the normal level, for the fall by stating that it had disrupted auto retail performance. “Excessive rainfall has significantly impacted auto sales, contributing to the decline,” the report said.
The 2W segment grew by 6.28% YoY but lost 7.29% MoM. Market saturation and disruptions due to weather conditions were marked as the primary factors for this dip in two-wheeler sales. Though growing YoY, the MoM decline indicates that the sector is prone to external factors.
The report marked a 4.53 percent YoY and a 3.46 percent MoM decline in the PV segment, while the CV segment registered an 8.5 percent MoM and a 6.05 percent YoY decline. According to the report, commercial vehicle sales witnessed this sharp decline because of weak industrial demand and also weather-related issues.
On that, the report pointed out: growing inventory woes in PV. Inventory days extended up to 70-75 days or around 7.8 lakh vehicles worth Rs 77,800 crore. High inventory levels and pushy dispatches from OEMs have led to cash flow stress for the dealers. The emerging issues have hit the profitability of the dealers.
The report pointed out, “Dealers are feeling the pressure on account of aggressive dispatches from OEMs, cash flow pressure, and lower profitability.” For this, FADA has now demanded that banks and NBFCs should restrict funding for those maintaining high inventory. The report also said there is an urgent need for dealers. And OEMs to make necessary changes in supply as a strategy to avoid an inventory crisis.
Ahead of this, the report assumed guarded optimism into the next few months. With the festive season holding prospects of growth. At the same time, the study also warned that the auto retail market needs to work its way through ongoing challenges regarding weather uncertainties and inventory management. Effective strategic planning, inventory control, and targeted marketing would hold the key to leveraging festive demand in the face of compelling market pressures.
In a nutshell, the plunge in auto sales for August 2024 is symbolic of unusual weather patterns and inventory challenges. The call by FADA for tighter funding and a revised supply strategy underlines the need for a balanced approach toward averting such issues. With the festive season just knocking at the door. The auto industry needs to rethink its strategies to leverage growth opportunities while trying to resolve some existing challenges.
ANI
