Automobile sales drop 7.5% YoY in May 2019, two-wheeler worst hit: FADA

Automobile retail sales dropped by 7.5 per cent year-on-year (YoY) in May 2019 to 17,71,920 units from 19,14,795 units in May 2018. Earlier this week, the Society of Indian Automobile Manufacturers’ (SIAM’s) data, which is for wholesale figures, showed a fall of 8.62 per cent in total domestic sales in May 2019 compared to May 2018. 

Dealers expect the near term outlook for the next 4-6 weeks to be gloomy.

On Friday, the Federation of Automobile Dealers Associations (FADA), the apex national body of retail automobile industry, released its monthly data that showed YoY sales across all categories declining in May. The worst hit was the two-wheeler industry due to an increase in insurance rates, liquidity crunch, poor sentiment, rural distress and uncertainty of the BS-VI regulations, among other factors.

While overall passenger vehicle wholesale figures declined by 20.55 per cent in May to 2,39,347 units from 3,01,238 units in May 2018, FADA’s retail number shows that retail sales dropped by one per cent. One of the key reasons for this is that the PV inventory is heading down. 

Positive development of a few original equipment manufacturers (OEMs) have initiated an effort towards 21 days of inventory for sustained dealer viability.

Passenger car sales was impacted YoY due to various factors, including NBFC trouble, election-related impasse, high base number and BS-VI expectations in a couple of quarters.

The CV story continues to be bad as retail sales dropped by 7.8 per cent YoY to 62,551 units in May against 67,847 units in May 2018. This is the only segment that continues to be in the red, on a month-on-month basis between May 2019 and April 2019, while other segments reported growth. 

New regulatory rules, softer freight rates and a liquidity crunch at non-bank lenders (which finance half the CV sales) are among the reasons which impacted sales.

Ashish Harsharaj Kale, president, FADA, said that May 2018 had a very high base and had witnessed the second highest number of registrations on a monthly basis in the last fiscal.

He said liquidity and inventory continues to put pressure on the dealers. While two-wheeler makers continue with high inventory at 55-60 days in May 2019 (against 45-50 days in April), for PVs it ranges from 35-40 days (40-45 days). For commercial vehicles or CVs, it ranges from 45–50 days in May.

Kale said the CRR reduction by the RBI has not seen a reduction in interest rates at the retail level. The current situation continues to be worrisome and consumer sentiment is negative, said FADA.

With liquidity still an issue and the new government in the process of planning and rolling out new initiatives coupled with delay in monsoon, dealers expect the near term outlook for the next 4-6 weeks to be similar to last month with overall auto retail sales continuing to be under strain across all verticals, said Kale.

The long-term outlook for the auto industry and the auto dealership community continues to be very strong and positive, despite the prolonged slowdown, he added.

An accommodative RBI, a progressive Budget, an average monsoon and overall stability in consumer sentiment due to political stability will help the sector return to the growth phase. FADA is hopeful it will happen in the next 8-10 weeks.