- Q1FY20 ends on a negative note as Total Vehicle Registrations for the quarter
decreases by -6% YoY. CV segment leads the de-growth at -14% followed by 2W at
-6.4% and 3W at -6.1%. PV falls the least with -1%
- For the month of June, sales were negative both YoY and MoM with MoM drop
seen higher with delay in monsoon and continued liquidity tightness affecting
consumer sentiment and on YoY basis, Total Vehicle Registrations fall -5.4%, with
CV falling -19.3%, 2W -5%, PV -4.6% and 3W 2.8%
- PV inventory levels continue to decrease giving the much-needed respite, but 2W
and CV inventory increases further and continues to remain a serious cause of
worry for Auto Dealers
- Budget Provisions Taken for Liquidity easing yet to take effect as tight liquidity
situation continues coupled with Delayed and Deficient Monsoon for June lead to
weakening of overall sentiments from previous month
16th July’19, New Delhi: The Federation of Automobile Dealers Associations (F A D A) today released the Monthly Vehicle Registration Data for the Month of June’19.
June-19 Retail Sales
Commenting on June’19 performance, F A D A President, Ashish Harsharaj Kale said, “Despite starting the month with a positive outlook and hope, the monthly sales ended in a de-growth due to continued liquidity tightness and a much-Delayed monsoon. Despite Inquiry levels being reasonably strong, Retail sales got affected as consumer sentiment continued to be weak and purchase postponement was seen across all segments”
A Few Highlights of the Vehicle Registrations for the month of June are mentioned below:
– Overall the States with Highest Vehicle Registrations were Uttar Pradesh (2,93,905),
Maharashtra (1,56,716) and Tamil Nadu (1,49,698)
– In PV Category, the States with highest registrations were Uttar Pradesh (30,358), Maharashtra (24,806) and Karnataka (18,288)
– In 2W Category, the States with highest registrations were Uttar Pradesh (2,55,812), Tamil Nadu (1,24,534) and Maharashtra (1,18,453)
– In 3W Category, the States with highest registrations were Uttar Pradesh (7,735), Maharashtra (7,285) and Gujarat (4,960)
– In CV Category, the States with highest registrations were Tamil Nadu (6,500), Maharashtra (6,172) and Karnataka (4,633)
PV manufacturers continued to reduce wholesale Billing to Dealers as well as regulated production in the month of June hence helping Dealer Correct the High Inventory. With the current trend continuing for a couple of more weeks, inventory in PV’s will for the first time since the downturn will come down to healthy levels of around 4 weeks across many geographies and heading towards the F A D A Recommended and Requested levels of 21days or 3 weeks.
The New Norm of 21 days or 3 weeks of inventory will help dealers in managing their Viability and Profitability better given the fast changing dynamics of Our Trade and F A D A would once again appreciate and applaud the Bold Steps taken by our Passenger Vehicle Principals in whole heartedly Supporting Us on this.
Serious Regulation of Wholesale Billing is required by Our 2W and CV Principals to get Dealer Inventory to 21 days as inventory in both these categories have risen to alarming levels. 2W Dealer Especially have been under Continued High Stock situation from September 2018, the start of the Downturn.
With the ongoing pressure and Premium on Dealer Working Capital coupled with Falling Sales, this can turn into a Serious situation for the dealers if not Corrected at the earliest and F A D A would Once again Appeal to Our Principals of 2W and CV to action urgent regulation of Wholesale billing to Dealer and helping Channel Partners avoiding the multiple complications of High Dealer Inventory in such market situations.
Near Term Outlook
Due to Delayed Monsoon in June and uneven spread in the 1st half of July, the near-term Outlook of 4-6 weeks remains negative as Weak Consumer sentiment and Tight Liquidity conditions continue. F A D A will once again be engaging with our Policy makers with an appeal to look at the current situation and request for Urgent measures to support the Auto Industry get back to its Growth Trajectory.
Measures such as Partial or Temporary Reduction of GST, an attractive Scrappage Policy and Most Importantly Liquidity Easing have already been suggested by the Industry and by F A D A and we will pursue its implementation putting forward our logic for these measures to our Government. F A D A believes that with Easier Liquidity and the Positive steps taken in the Budget coupled with an average monsoon will get back Stability in Auto Sales towards by mid to end August and as we head towards festive season, the Industry will return to its growth trajectory.
On the Liquidity front Kale Commented, “Liquidity still continues to be a worry, both at the retail front as well as the for Dealer Working Capital. With NBFC’s and Banks still in a cautious mode, the Normalcy in Lending which is required to get us back to growth still cannot be seen.
Urgent steps towards Liquidity Easing to Banks and NBFC’s will help them increase their Risk-taking capacity, which is much required for lending to the Category of Customer with no credit history, but resourceful and aspirational and who gets growth to the Industry.
We hope that with the recapitalisation of Nationalised Banks announced in the Budget by the Finance Minister as well as the 1 lakh Crore Funding window opened up for Stable NBFC’s, we will see the Over Cautious Approach diminish and return of Banking and NBFC Industry to Normal ,which is much required for growth of Auto Retails”
On the Long-Term Outlook, F A D A President commented, “With a vehicle penetration of less than 30 Cars per Thousand, the Growth Story of Indian Auto Sales will continue for the next decade and beyond. Countries within Asia and having similar or lower economic growth as India, like Malaysia, Indonesia, Thailand, Philippines and Sri Lanka, all have a far higher vehicle Penetration and their Auto Sales are still growing.
As Our Ever-Growing Road Network keeps Connecting Every Corner of Our Country to the Main Stream and Consumption in India Increases backed by continued Infrastructure Growth, The Indian Automobile Story will continue to Flourish and so would Auto Dealerships, which are the Delivery arm of this Growth.
The Current situation despite being Worrisome, is Temporary and the Fundamentals of our Fast Progressing Nation continue to remain strong and growing stronger by the day. With Growing Progress Comes Growing Aspirations and Growing Mobility Needs of its People and the Automobile Sector is Best Suited to Deliver on Both’’
Key Findings from our Online Members Survey
• On the Current Sentiments of the Industry
o 56% Dealers rated it as Bad (43% in May’19)
o 39% Dealers rated it as Neutral (54% in May’19)
• On the Liquidity Front
o 46% Dealers rates it as Neutral (57% in May’19)
o 46% Dealers rated it as Bad (36% in May’19)
• On the Current Inventory Front
o Average inventory for PVs ranges from 30 – 35 days (35-40 days in May’19)
o Average inventory for 2W ranges from 60 – 65 days (55-60 days in May’19)
o Average inventory for CV ranges from 55 – 60 days (45-50 days in May’19)
A Chart showing Vehicle Registration Data can be found below:
Category June’19 June’18 May’19 YoY (%) MoM (%)
2W 13,24,822 13,94,770 14,14,236 -5.0% -6.3%
3W 48,447 49,837 51,133 -2.8% -5.3%
CV 48,752 60,378 62,533 -19.3% -22.0%
PV 2,24,755 2,35,539 2,53,529 -4.6% -11.3%
Total 16,46,776 17,40,524 17,81,431 -5.4% -7.6%
Category Q1′ 19-20 Q1′ 18-19 YoY change (%)
2W 40,64,903 43,44,827 -6.4%
3W 1,47,726 1,57,377 -6.1%
CV 1,75,304 2,03,823 -14.0%
PV 7,28,785 7,36,290 -1.0%
Total 51,16,718 54,42,317 -6.0%
Source: F A D A Research