The Business Bytes
New Delhi, October 7, 2024 (TBB Bureau): India’s automobile market saw a 6.55 per cent year-on-year growth in retail sales during the first half of the current fiscal year (FY25), with robust two-wheeler (2W) sales driving the surge, according to a report from the Federation of Automobile Dealers Associations (FADA). The report indicates that rural markets are poised to further spur demand in the coming months, especially during the festive season.
From April to September, the automobile sector registered notable growth across key segments. Two-wheeler sales increased by 9.08 per cent, while three-wheeler (3W) sales rose by 7.58 per cent. The passenger vehicle (PV) segment also showed a modest increase of 1.07 per cent. However, commercial vehicles (CV) and tractor retail sales experienced a decline, falling by 0.65 per cent and 8.82 per cent, respectively, according to FADA’s data.
FADA President C.S. Vigneshwar noted that the Shraddh period had a dampening effect on retail sales across various categories. “Discounts and offers have been introduced across segments to stimulate demand, but these have yet to translate into a significant improvement in sales,” he said. The above-normal southwest monsoon, with 8 per cent higher rainfall than usual, disrupted auto retail performance in many regions, affecting both demand and customer walk-ins.
Despite these challenges, the outlook for the near term remains cautiously optimistic, particularly with both Navratri and Diwali falling in the same month. This overlap is expected to drive a significant surge in vehicle sales, especially in rural markets, where healthy water levels in reservoirs and improved crop yields are anticipated to boost demand. New vehicle launches are also planned for the festive season, contributing to the expected rise in two-wheeler, passenger vehicle, and tractor sales.
However, the PV segment faces potential hurdles due to high inventory levels at dealerships. If sales do not meet expectations in October, dealers could encounter financial strain from unsold stock accumulating in their warehouses. “Dealers and OEMs are banking on strong festive sales, particularly in rural markets, where positive cash flow and better agricultural conditions are expected to spur demand,” the report stated.
FADA has called for immediate corrective actions from OEMs to mitigate the risk of financial setbacks. Vigneshwar also urged the Reserve Bank of India (RBI) to issue an advisory to banks, advocating stricter channel funding policies based on dealer consent and actual collateral to protect dealers from additional financial pressures caused by unsold inventory.
