Automakers see tepid sales this Diwali as consumers stay away
MUMBAI: It was another dull Diwali for automakers this year as an erratic monsoon, higher fuel prices, interest rates, inflation and insurance costs held back buyers, according to close to 20 dealers across the country.
Retail sales failed to bring down inventory at dealerships to normal levels of 20-25 days, though dispatches have been slow for the past four months.
Inventory levels for passenger vehicles (cars and utility vehicles) are at 35-40 days post Diwali, compared with 45-50 days a month ago, while for two-wheelers, dealers have adequate stock for 50 days, from 60 days earlier, said Saharsh Damani, chief executive officer of the Federation of Automobile Dealers Association (FADA), the apex body of dealers across the country.
Accordingly, auto firms may now have to reduce inventory substantially in the months ahead as the festive season, which began with Onam in September this year and concluded with Dhanteras, the first day of Diwali, on November 6, failed to lift consumer sentiment substantially.
Dhanteras is one of the most important days in the festival calendar for auto makers, consumer durables companies and real estate firms, as the day is considered auspicious for big-ticket purchases. Damani estimates a 12-15% fall in retail sales of twowheelers this festive season, while the figure is expected to be flat for passenger vehicles.
Last year, buyers held back purchases because of uncertainty over the goods and service tax (GST) regime, which was implemented on July 1, 2017.
A rise of close to 8% and 22%, respectively, for the year-to-date in petrol and diesel prices in Mumbai kept buyers away, while devastating floods in Kerala also resulted in a sharp drop in sales during Onam.
After two successive rate hikes in June and August, the Reserve Bank of India’s monetary policy committee kept key policy rates unchanged in early October, citing a benign inflation trajectory and downward revision to inflation projections, though the stance changed to “calibrated tightening” from “neutral”. However, the policy indicates uncertain times for consumer finance because banks are likely to align them with the RBI’s two previous interest rate increases, which would push up borrowers’ EMI payments.