Automobile sales decline 9.26% YoY in September, PV dealers facing all-time high inventory levels: FADA

FADA urged RBI to issue stricter guidelines on channel funding policies to mitigate the financial risk faced by dealers

The Federation of Automobile Dealers Association on October 7 said the overall automobile sales fell 9.26% in September with mixed performance observed across segments.

Ganesh Chaturthi and Onam festivals failed to ignite demand, said FADA.

Two-wheeler retail sales fell 8.51% on an annual basis "driven by weak consumer sentiment, low inquiries, and delayed purchases due to heavy rains and seasonal factors like Shraddh", said FADA.

Passenger vehicle sales saw steep decline of 18.81% YoY while commercial vehicles sales declined 10.45% YoY, with only marginal MoM growth of 1.46%, "reflecting subdued market conditions and weak government spending", stated a release by FADA.

Passenger vehicle dealers are facing all-time high inventory levels 80-85 days, equivalent to 7.9 lakh vehicles worth Rs 79,000 crore due to aggressive OEM dispatches, said the auto body. "Dealers are under financial pressure, with increased cash flow challenges," said FADA.

"The 2024 southwest monsoon recorded 8% above-normal rainfall, disrupting auto retail performance in several regions and negatively impacting demand and walk-ins," added FADA.

FADA also urged Reserve Bank of India to issue stricter guidelines on channel funding policies to mitigate the financial risk faced by dealers.

"Given the critical festive season around the corner, FADA urges OEMs to take immediate corrective measures to avoid a financial setback. FADA also calls on the Reserve Bank of India to issue an advisory to banks, mandating stricter channel funding policies based only on Dealer consent and on actual collateral, to prevent Dealers from facing additional financial pressure due to unsold stock. This is the final opportunity for PV OEMs to recalibrate and support market recovery before it's too late," said FADA President C S Vigneshwar.

"Festive season boost with both Navratri and Diwali falling in the same month is expected to uplift sales. Favourable agricultural conditions, driven by good monsoon and improved crop yields, likely to spur rural demand for 2W, PV and Trac segments," said FADA in its near-term outlook.