Auto sales continued to decline at dealerships in June even as inventories rose for two-wheelers and trucks amid a consumption slowdown.
Retail auto sales, measured by vehicle registrations, fell 5 percent and 4.6 percent year-on-year for two-wheelers and passenger vehicles, respectively, in June, according to data released by Federation of Automobile Dealers Associations. For trucks, the slump was even worse with registrations falling 19.3 percent over the previous month.
For the quarter ended June, commercial vehicle registrations declined 14 percent year-on-year. Two-wheeler and passenger vehicle registrations declined 6.4 percent and 1 percent, respectively.
Despite starting June with a positive outlook and hope, the monthly sales contracted due to continued a liquidity crunch and a delayed monsoon, FADA President Ashish Kale told BloombergQuint. While inquiries were reasonably strong, retail auto sales didn't pick up as buyers deferred purchases, he said.
The auto industry has been struggling to push sales since the festive season last year. Increased upfront insurance costs and higher fuel prices kept buyers away. Discounts, too, failed to lift demand, forcing automakers to cut production as inventory piled up.
Carmakers continued to cut wholesale volumes to dealers as well as reduced production, helping dealers in dealing with high inventory. Inventory levels for two-wheeler and commercial vehicles, however, increased by five days over the previous month.
According to FADA, these were the average inventory levels in June:
- Passenger vehicles: Down to 30-35 days from 35-40 days in May
- Two-wheelers: 60-65 days compared with 55-60 days in May
- Commercial vehicles: 55-60 days from 45-50 days in May
Kale expects the outlook to remain negative in the near term. Due to a delayed monsoon in June and uneven spread in the first half of July, the outlook for the next four to six weeks remains negative as weak consumer sentiment and tight liquidity conditions continue.
He, however, expects the auto sector to return to its growth trajectory ahead of the festive season this year. “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.”
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