Auto dealers warn of risks to supply, retail volume growth

China's rare earth export curbs have upended global auto supply chains, exacerbating challenges for Indian carmakers. Reuters

Geopolitical tensions and spillover effects from U.S. tariffs may weigh on consumer sentiment, while China's rare earth export curbs could further tighten vehicle supply and drag on retail sales, India's Federation of Automobile Dealers Associations (FADA) said on Monday.

Retail volumes fell 9.4% in June from a month ago and the average time a car stayed in a showroom, or inventory days, rose to about 55 days from 52-53 days in May, above the FADA's recommended threshold of 21 days.

China's rare earth export curbs have upended global auto supply chains, exacerbating challenges for Indian carmakers already grappling with high inventories and tighter financing amid uncertainty over U.S. President Donald Trump's tariffs.

"As we enter July 2025, dealer sentiment appears tilted towards (a) slowdown - flat and de-growth expectations (42.8% and 26.1%) exceed growth forecasts (31.1%). Similarly, booking-pipeline traction remains uneven," FADA said.

However, above-normal monsoon showers should bolster rural demand in the near term, FADA said, adding that July will likely see mixed fortunes, driven by an agrarian tailwind, yet tempered by seasonal headwinds and elevated price points.

Last month, the FADA warned that demand may remain subdued in June, citing elevated inventory levels, reduced financing and concerns about rare earth shortages.