New Delhi: As the consumer sentiment continues to be subdued due to the overall slowdown in the economy and tightening of credit norms by the banks, retail sales of automobiles across the country in June, declined by 5.4% year on year to 1646776 units, showed data released by the Federation of Automobile Dealers Associations (FADA) on Tuesday. Passenger vehicle manufacturers in anticipation of continued decline in the demand for vehicles had reduced dispatches of vehicles by double digit in every segment.

Showroom sales of passenger vehicles decreased by 4.6% y-o-y to 224755 units as most of the manufacturers have been reluctant to push more vehicles with the dealers. According to data released by Society of Indian Automobile Manufacturers (SIAM), the wholesales passenger vehicle segment declined significantly by 17.54% to 225732 units led by 24% fall in passenger car sales to 139628 units and utility vehicles by 0.9% to 72917 units.

As an indication of the overall slowdown in the economic activity and revised truck axle norms, retail sales of commercial vehicles declined significantly by 19.3% to 48752 units. Lack of financing options from non banking financial companies have further exacerbated the situation for truck fleet owners.

Pointing towards the subdued demand scenario in the rural markets as a result of the decrease in farm income India and increase cost of ownership due to enhanced insurance cost, retail sales of two wheelers also declined by 5% y-o-y to 1324822 units.

During the first quarter of the current financial year, sales of automobiles through showrooms declined by 6% to 5116718 units. The same for passenger vehicles though decline by just 1% but commercial vehicle sales declined sharply by 14% while the for two wheelers sales declined by 6.4%.

As the result of reduction in production of vehicles by passenger vehicle manufacturers, the inventory with dealers have dropped in the range of 30-35 days from 35 – 40 days in May, while for two wheelers it has increased to 60- 65 days compared to 55-60 days last month. The inventory of commercial vehicles with dealers is in the range of 55-60 days compared to 45-50 days in May.

According to Ashish Kale, president, FADA, liquidity still continues to be a worry, both at the retail front as well as for dealer’s working capital needs. With NBFC’s and banks still in a cautious mode, normalcy in lending which is required to get us back to growth still cannot be seen.

“Due to delayed monsoon in June and uneven spread in the first half of July, the near-term outlook of four-six weeks remains negative as weak consumer sentiment and tight liquidity conditions are likely to continue. FADA 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,” added Kale.

Source: Live Mint