Discounts in Dec fail to drive up passenger vehicle sales

NEW DELHI : Retail sales of passenger vehicles continued to decline in December after a subdued festive season. Sales of passenger vehicles dropped by 3% to 202,585 units in December from a year earlier, according to data released by lobby group Federation of Automobile Dealers Associations (FADA).

From the preceding month, passenger vehicle sales fell 7% in December despite substantial discounts to lure customers. Given that customer sentiment across the country was yet to recover despite a significant drop in fuel prices, most vehicle makers had also pruned their monthly production of vehicles during the period.

December has always been a healthy month for retail sales of automobiles as most firms try to clear inventories at the dealer’s end before the new calendar year begins. The discounts offered during this period are also significantly higher compared with the rest of the year.

Continued recovery in the rural market, however, helped retail demand for two-wheelers stage a turnaround. Sales of motorcycles, scooters and mopeds from showrooms rose by 11% year-on-year to 1.14 million units in December.

As the liquidity crisis in nonbanking financial companies (NBFCs) slowed credit flow to fleet owners, retail sales of commercial vehicles in December declined by 15% month-on-month to 53,712 units. The inventory with dealers is yet to reach the usual levels as a result of subdued sales in past four months.

According to a FADA members’ survey, the current inventory of passenger vehicles is at 35-40 days, while, for two-wheelers, it is 55-60 days.

The inventory for commercial vehicles—a segment where sales have been hit because of the liquidity crisis in NBFCs—the stock with the dealers stood at 35-40 days.

FADA president Ashish Harsharaj Kale said dealers are seeing signs of a revival compared to the recent festive season as retail sales of passenger vehicles have been good in the later part of December and the decline has been arrested. FADA’s report is the first ever monthly retail sales data released by a lobby group representing stakeholders of the automotive industry. It will continue to release monthly retail sales data between the 7th and 10th of every month.

Hitherto, automobile companies and their lobby group, Society of Indian Automobile Manufacturers (Siam), used to release the number of vehicles manufacturers dispatched to dealers every month, which, however, did not reveal the actual situation on ground.

“We hope that the retail data will act as a barometer for the industry, as well as for policy makers, and help them understand the on-ground situation of auto sales, which in turn, will help in framing future actions and policies,” said Kale.

“This will not only help us, but also all the stake holders of the industry in planning the business in a much more competent way and help balance inventory levels,” he added.