August auto sales dip due to excess rainfall, FADA urge banks to tighten funding to dealers

New Delhi [India], September 6 (ANI): Auto retail sales in India experienced a significant decline in August 2024, primarily due to excessive rainfall during this monsoon season, according to a report by the Federation of Automobile Dealers Associations (FADA).

The report highlighted a 7.01 per cent month-on-month (MoM) decline in overall retail auto sales, falling from 20.34 lakh units in July to 18.91 lakh units in August. However, despite this monthly setback, the sector witnessed a modest 2.88 per cent year-on-year (YoY) growth compared to August 2023.

“India saw 15.9 per cent excess rainfall, with a significant surplus in key regions, disrupting auto retail performance,” said the report.

The report added that the two-wheeler (2W) segment, despite showing a 6.28 per cent YoY growth, registered a 7.29 per cent MoM decline. It gave the market saturation, and weather disruptions were as the key factors behind the fall in two-wheeler sales.

In the passenger vehicle (PV) segment, the report stated that it faced a 4.53 per cent YoY and 3.46 per cent MoM decline, while the commercial vehicle (CV) segment recorded an 8.5 per cent MoM and 6.05 per cent YoY drop. FADA noted that weak industrial demand and weather-related challenges were major contributors to the significant drop in commercial vehicle sales.

Adding to the concerns, FADA’s report highlighted growing inventory challenges in the PV segment, with stock days ranging between 70-75 days, representing approximately 7.8 lakh vehicles valued at Rs 77,800 crore.

The report noted that these high inventory levels, combined with aggressive OEM (original equipment manufacturer) dispatches, have created cash flow pressures for dealers, impacting their profitability.

“Dealers under pressure due to aggressive OEM dispatches, with dealers facing cash flow challenges and reduced profitability” the report said.

To address this, FADA has urged banks and NBFCs to tighten funding for dealers with excessive inventory. Additionally, the report emphasized the need for dealers and OEMs to recalibrate their supply strategies to avoid a potential inventory crisis.

For the upcoming months the report paints an optimistic picture with festive season offering growth opportunities. However, it also noted that the auto retail market must navigate challenges posed by weather uncertainties and inventory management. Effective strategic planning, inventory control, and targeted marketing will be essential to capitalize on the festive demand while mitigating ongoing pressures.