Auto retail sales drop 8.06 % in Feb as weak demand continues: FADA

High inventories put pressure on working capital

The auto industry’s retail sales in February dropped 8.06 per cent, even as weak consumer demand continues for the sixth straight month. Inventory levels across all categories reached an unsustainable high and at alarming levels in two-wheelers, add dealers.

The Federation of Automobile Dealers Associations (FADA) of India data shows the total auto sales in February was 1,452,078, compared to 1,579,349 units last year — a drop of 8.06 per cent year-on-year (YoY). The month-on-month (MoM) drop was 15.30 per cent, from 1,714,400 units sold in January.

Last week, the Society of Indian Automobile Manufacturers released the wholesale data, which stated total sales were 2,034,768 units, against 2,111,804 units in the same month last year — a drop of 3.65 per cent.

FADA said passenger vehicles sales dropped 8.25 per cent to 215,276 units in February, from 234,632 units in February 2018. The MoM drop was 28.62 per cent, as the January sales was 301,603 units.

FADA President Ashish Harsharaj Kale said the January sales were driven by year-end stock clearance and new launches generating excitement.

Two-wheeler sales dropped 7.97 per cent in February to 1,125,405 units, from 1,222,883 units. The MoM drop was 13.45 per cent (January sales: 1,300,265).

The YoY commercial vehicle sales dropped 7.08 per cent to 61,134 units, from 65,789 in 2018; MoM, it grew by 4.92 per cent (January sales: 58,266 units).

Three-wheeler sales dropped 10.32 per cent in February at 50,263 units, compared to 56,045 units in the same month last year.

Kale said he didn’t see any immediate triggers to boost sales. While the enquiry levels were good, they were not getting converted into sales due to liquidity crunch and interest rates.

While on the one side sales are down, dealers allege that original equipment manufacturers are pushing the inventory and calling for some production discipline.

Earlier the inventory levels used to be around 25-35 days. The now range between 45 and 90 days; the highest being in the two-wheeler segment at 80-90 days.

Dealers say this increased working capital requirement, which is now available at