Dealer body: Retail car sales drop to "new low" in February

The month of February 2019 has witnessed disappointing sales for the automotive retail industry. If the numbers are any indication of the months to come, India's automobile industry will need to revamp its strategy to bring back consumers.

The Federation of Automobile Dealers Associations (FADA), which is the apex dealer body, has released the monthly vehicle registration data for February 2019. According to the association, it is a new low, as the weak consumer sentiment has continued for the sixth month in a row. The revival of sales in January has failed to sustain as it was largely due to extended year-end stock clearance and a few new launches, it observed.

At the end of the month, a total of 14,52,078 vehicles were sold across categories like two-wheelers, three-wheelers, passenger vehicles and commercial vehicles. Overall, the volumes fell 15.3 percent over January 2019, and growth dipped 8.06 percent on a year-on-year basis. Sales of passenger vehicles declined 28.62 percent over January to 2,15,276 units (down 8.3 percent on a YoY basis).

“The industry is once again witnessing a downward trend as February turned out to be one of the slowest months for automotive retail sales during this financial year. Indian auto sales are experiencing a prolonged slowdown as its already seen six months of slowing sales and growth reversal, and positive triggers in the near term appear few," according to Ashish Harsharaj Kale, president, FADA.

He further mentioned that, starting with the huge hike in insurance costs in September 2018, the industry has seen a lot of negative factors come together in the last few months, leading to a huge postponement in purchase decisions and, overall, weakening of consumer sentiment. FADA observed that dealerships in India currently have high stock situation of passenger vehicles (PVs), which had seen partial correction in the last two months but are now back to the “unsustainable levels” seen in November 2018. According to a survey conducted by FADA among its members, the present inventory levels of passenger vehicles ranges from 50-60 days.

Prolonged maintenance of such high inventory and its additional costs would be unsustainable, and with demand continuing to be a challenge, the dealerships are urgently looking to reduce their inventory in the months of March and April, Kale said.

Given the present environment, FADA has urged carmaker's to take a realistic stock of the present retail situation and recalibrate their production to regulate dealer invoicing in the coming two months, which will facilitate the return to stock normalcy for dealerships. This would help maintain a sustainable business environment till the industry again hits the high growth trajectory.