Retail Car Sales Dip In August Even As Inventory Stays Elevated

After heatwaves, the monsoon is raining on Indian car industry's parade.

Retail car sales—measured as vehicle registrations on the government's VAHAN website—fell 4.53% year-on-year to 3.1 lakh units in August 2024, according to a statement released by the Federation of Automobile Dealers Association on Thursday. Sequentially, the number was down 3.46%.

"This monsoon season has brought unpredictable weather, starting with extreme heat waves that delayed monsoon and transitioned into heavy rainfall, leading to flood-like conditions in several areas," FADA President Manish Raj Singhania said in the statement. "These weather anomalies have had a direct impact on India's auto retail market, which registered a modest year-on-year growth of just 2.88% in August."

The rains haven't spared motorcycles and scooters, either.

While two-wheeler retail sales rose 6.3% year-on-year to 13.4 lakh units, it was down 7.29% from the previous month, primarily due to rain-related disruptions and market saturation.

Commercial vehicles saw a sharp decline—8.5% month-on-month and 6.05% year-on-year—due to weather and weak demand.

Retail Auto Sales In August 2024: Key Highlights (YoY)

• Car retail sales down 4.53% at 3.1 lakh units.

• ⁠⁠⁠Two-wheeler retail sales up 6.3% at 13.4 lakh units.

• Three-wheeler retail sales up 1.6% at 1.05 lakh units.

• ⁠⁠Commercial vehicle retail sales down 6.1% at 73,253 units.

• ⁠⁠Total vehicle retail sales up 2.9% at 18.9 lakh units.

Elevated Inventory

The slump in retail sales has simply exacerbated the inventory woes at the dealerships, even as carmakers claimed to have realigned production with demand.

India's car dealerships are saddled with unsold stock worth Rs 77,800 crore, equivalent to 78 lakh vehicles or 70-75 days of inventory, FADA said.

"Dealers are under pressure due to aggressive dispatches, with dealers facing cash flow challenges and reduced profitability," the lobby said.

According to market leader Maruti Suzuki India Ltd., original equipment manufacturers shipped 3.5–3.55 lakh cars in August. That compares with retail car sales of 3.1 lakh units—a gap of nearly 50,000 in a month itself. Maruti Suzuki, while announcing its monthly wholesales on Sept. 1, said it is "comfortable" with its inventory levels at 36 days.

"Dealers and OEMs need to recalibrate supply strategies to prevent an inventory crisis," FADA said in the statement, urging lenders to control funding to dealers with excessive inventory.

Festive Outlook

The grim sales picture, thanks in no small measure to the unprecedented monsoon, now threatens to spill over into the festive season.

"Festivals such as Ganesh Chaturthi, Onam, and Navratri are expected to uplift sentiment, particularly in urban areas," FADA said. "Favourable rainfall in some regions has improved agricultural prospects, which may boost rural sales post-monsoon."

On the flip side, the India Meteorological Department has forecast heavy rains in September, which could damage crops and weaken rural purchasing power. Additionally, the Shraddh month—an inauspicious period for purchases—is expected to pause car sales in September.

Additionally, elevated inventory and aggressive discounting to clear the stock can erode profitability at the dealership level.

"To navigate the challenges, strategic inventory management and targeted marketing initiatives will be crucial in maximising festive sales and mitigating risks from adverse weather conditions," FADA said.