Passenger Vehicle Sales Hit a Speed Bump, Down 5% in August; FADA Worried About Inventory Surge

India’s passenger vehicles retail sales slipped five percent year-on-year in August 2024. Data released by the Federation of Automobile Dealers Associations (FADA) show that passenger vehicle (PV) registrations slipped to 3.09 lakh units last month versus 3.23 lakh units in August 2023.

Auto Sales: Weak Consumer Sentiment
FADA has attributed the sharp drop in sales to factors such as weak consumer sentiment, continuous heavy rains and customers delaying purchases. "Even with the arrival of the festive season, the market remains under significant strain,” FADA President Manish Raj Singhania said in a statement.

PV Sales: High Inventory Levels
FADA, which represents the automobile dealers, has also raised an alarm over the surge in inventory levels at car dealerships. According to the industry body, the PV stock days have now stretched to 70-75 days, with inventory standing at 7.8 lakh vehicles. The value of this inventory, according to FADA, is at an alarming ₹77,800 crore.

PV Sales: Dealers Versus OEMs
FADA President Manish Raj Singhania has also slammed carmakers for not helping dealers tackle the rising inventory levels. He has claimed that rather than responding to the situation, Original Equipment Manufacturers (OEMs) have increased PV dispatches to dealers.

FADA has now asked OEMs to recalibrate their supply strategies to avoid inventory oversupply. "If this aggressive push of excess stock continues unchecked, the auto retail ecosystem could face severe disruption," Singhania warned.

FADA President has also urged financial institutions “to intervene and immediately control funding to dealers with excessive inventory." He has also asked dealers to protect their financial health by not accepting additional stock from OEMs.

PV Sales: Business Outlook

While the dealers’ body is warning all stakeholders about the surge in inventory levels, it remains cautiously optimistic in its outlook. FADA believes that the current festive season and pick-up in rural demand present promising opportunities for growth. However, the prolonged monsoon and surge in inventory levels remain a concern for the industry body.

To tackle these challenges, FADA has recommended strategic inventory management as well as targeted marketing initiatives. These steps, it believes, will help maximise festive sales and mitigate risks.