Festive buys help arrest fall in car sales to single digits
Retail sales of passenger vehicles fell by 7.12 per cent in August 2020 at 1,78,513 units compared to 1,91,189 units sold a year ago.
Meanwhile, sales of two-wheelers dropped by 28.71 per cent to 8,98,775 units from 12,60,722 units in August 2019. Commercial vehicle sales dropped 57.39 per cent to 26,536 units from 62,270 units.
Tractors was the only segment that witnessed a sales jump by 27.80 per cent to 67,406 units from 52,744 units, a year ago.
Dealers said the overall demand is still not back to pre-covid levels as banks and non-banking financial companies (NBFCS) continue to tread cautiously towards funding.
Federation of Automobile Dealers Association (FADA) president Vinkesh Gulati said that with start of the festive season and the government’s continued efforts to open up India, August saw good numbers when compared to immediate previous months.
August also saw an arrest in decline and pullback efforts on all fronts, though on a year-on-year (YOY) basis, all categories except tractors continued to fall, though at a slower pace.
He added, “Passenger vehicles, after five months, saw a sales decline to single digit only. Customers, who were sitting on the fence, finally concluded their purchase during the ongoing festivals of Janmashtami and Ganesh Chaturthi. Entry-level passenger vehicles were in high demand as personal mobility is being preferred with the current pandemic showing no signs of abating. Apart from the rural market, which was showing revival signs until now, urban centres — for the first time — showed initial signs of demand pullback.
With the government’s priority of spending towards rural development and agriculture, coupled with good monsoon and a healthy sowing
season, tractor, small commercial vehicle and entry-level passenger vehicle sales saw positive impact in August.
“Commercial vehicles, especially medium and heavy commercial vehicles (M&HCVS), still suffer from higher lead times with financers and an increase in the cost of acquisition, leading to viability issues. A stricter CIBIL score is also affecting customer finance,” said Gulati.
The association requested the government to announce a demand boosting stimulus and is awaiting an announcement on reduction of goods and services tax (GST) for two-wheelers.
“We are also awaiting the muchrequired incentive-based scrappage policy. Both these measures will act as demand drivers for two-wheeler and even M&HCV sales in India.
This will make the auto industry a lead indicator for India’s growth,” he said.
On the outlook, he said, “September brings with itself, the inauspicious 16 days of the Shraadh period. This, coupled with 30 days of Adhik Maas (an extra month in the Hindu calendar that is inserted to keep the lunar and solar calendars aligned), is considered inauspicious in north, east and west India. During this time, no high value transactions take place.”
The moratorium period from banks has ended on August 31. During this period, if NPAS are not too high and the recovery rate is even neutral to positive, banks and NBFCS may return with aggressive financing schemes for auto loans. This will lead to a strong demand pullback.