Car sales drop 5% in August: FADA

Retail sales of passenger vehicles declined 4.5% year-on-year to 3.09 lakh units in August compared with 3.23 lakh units in the corresponding month last year, according to data released by the Federation of Automobile Dealers Associations (FADA).

Even with the arrival of the festive season, the market remains under significant strain due to delayed customer purchases, poor consumer sentiment and persistent heavy rains, says the auto dealers’ lobby.

FADA warns that inventory has reached alarming levels with stock stretching to 70-75 days and inventory totalling 7.8 lakh vehicles, valued at a whopping ₹77,800 crore.

“Rather than responding to the situation, PV OEMs continue to increase dispatches to dealers on a MoM basis, further exacerbating the issue,” it says.

FADA called upon all banks and non-bank lenders to intervene and immediately control funding to dealers with excessive inventory. “Dealers must also act swiftly to stop taking on additional stock to protect their financial health. OEMs, too, must recalibrate their supply strategies without delay, or the industry faces a potential crisis from this inventory overload. If this aggressive push of excess stock continues unchecked, the auto retail ecosystem could face severe disruption,” warns FADA.

Retail sales of commercial vehicles dropped 6% year-on-year to 73,253 units in August. Heavy rains, floods and landslides severely impacted market activity, says FADA. Reduced construction activity and sluggish demand in industrial sectors have further strained sales, it says. “The CV segment continues to struggle, facing pressure from steep discounting by competitors, which has only intensified the decline. Weak sentiment, coupled with inventory and cash flow challenges, continues to affect the industry,” the auto dealers’ body says.

Tractor sales dropped by 11.39% to 65,478 units in August.

Two-wheeler sales, however, bucked the trend by rising 6% year-on-year to 13.38 lakh units in August, aided by improved stock availability and the onset of the festive season.

“The Shraddh period in September, regarded as an inauspicious time for purchases, is expected to pause sales for some time. In the CV segment, sluggish construction activity, liquidity issues and weather-related disruptions are likely to suppress demand further. Aggressive discounting practices continue to pressure dealers, leading to reduced profitability and a generally cautious market sentiment,” says FADA.

“On the positive side, the upcoming festivals, such as Ganesh Chaturthi, Onam and Navratri, are expected to boost consumer sentiment, especially in urban areas. Moreover, favourable rainfall in certain regions has improved agricultural prospects, which could enhance purchasing power in rural areas as the monsoon subsides. In the CV segment, increasing demand for iron ore, steel transport, and tippers offers a potential lift, supported by new model launches and marketing efforts from OEMs,” the dealers’ lobby says.