Discounts fail to drive up auto sales in December

New Delhi: Retail sales of passenger vehicles continued to decline in December after a subdued festive season. Sales of passenger vehicles dropped by 3% to 202,585 units in December from a year earlier, according to data released by lobby group Federation of Automobile Dealers Associations (FADA).

Discounts fail to drive up auto sales in December

From the preceding month, passenger vehicle sales fell 7% in December despite substantial discounts to lure customers. Given that customer sentiment across the country was yet to recover despite a significant drop in fuel prices, most vehicle makers had also pruned their monthly production of vehicles during the period.

December has always been a healthy month for retail sales of automobiles as most firms try to clear inventories at the dealer’s end before the new calendar year begins. The discounts offered during this period are also significantly more compared with the rest of the year.

However, continued recovery in the rural market helped retail demand for two-wheelers stage a turnaround. Sales of motorcycles, scooters and mopeds from showrooms rose by 11% year-on-year to 1.14 million units in December.

As the liquidity crisis in non-banking financial companies slowed credit flow to fleet owners, retail sales of commercial vehicles in December declined by 15% month-on-month to 53,712 units.

The inventory with dealers is yet to reach the usual levels as a result of subdued sales in past four months.

According to a FADA members’ survey, the current inventory of passenger vehicles is at 35-40 days, while for two-wheeler it is 55-60 days. The inventory for commercial vehicles—a segment where sales has been hit because of the liquidity crisis in NBFCs—the stock with the dealers stood at 35-40 days.

FADA president Ashish Harsharaj Kale said dealers are seeing signs of a revival compared to the recent festival season as retail sales of passenger vehicles have been good in the later part of December and the decline has been arrested.

FADA’s report is the first ever monthly retail sales data released by a lobby group representing stakeholders of the automotive industry. It will continue to release monthly retail sales data between the 7th and 10th of every month.

Hitherto, automobile companies and their lobby group, Society of Indian Automobile Manufacturers (Siam), used to release the number of vehicles manufacturers dispatched to dealers every month, which, however, did not reveal the actual situation on ground.

“We hope that the retail data will act as a barometer for the industry, as well as for policy makers, and help them understand the on-ground situation of auto sales, which in turn, will help in framing future actions and policies. This will not only help us, but also all the stake holders of the industry in planning the business in a much more competent way and help balance inventory levels,” added Kale.

FADA said that despite the pick-up in sales in December the inventory of two-wheelers continues to be above normal and wholesale billing in January will be moderated taking into consideration the retail situation during the month.

According to FADA’s retail sales data for the festive season—during the 44-day period between Navratri and Diwali—total vehicle registrations declined 11%. While two-wheelers registrations fell 13%, four-wheelers declined by 14%, as the liquidity crunch faced by vehicle financiers, surge in fuel prices and higher insurance costs resulted in slower sales.

Retail passenger vehicle sales during the three quarters of the current fiscal (April to December) declined 2% year-on-year to 1,917,750 units, while the same for two-wheelers increased by just 5% y-o-y to 11,071,352 units.

 

source: livemint