India's Passenger Vehicles Record 10.18 per cent YoY Growth With 3,20,129 Units in July 2024 The Indian auto retail sector experienced a double digit growth of 13.84 per cent year-over-year (YoY)

India's automobile retail sector saw a year-over-year (YoY) growth of 13.84 per cent, with almost all categories witnessing an increase, as per a report from federations of automobile dealers association (FADA). Two-wheelers (2W) grew by 17 per cent, three-wheelers (3W) by 13 per cent, passenger vehicles (PV) by 10 per cent and commercial vehicles (CV) by 6 per cent. Tractors, however, continued to underperform, falling by 12 per cent YoY.

PV sales experienced a strong 14 per cent growth to 3,20,129 units in July'24 compared to 2,90,564 units in July'23, fueled by the introduction of new models and appealing pricing strategies. Dealers benefited from a healthy supply of products, attractive offers and an expanded product range. However, challenges such as heavy rainfall, low consumer confidence and fierce competition affected the market. Some dealers were able to maintain sales by implementing robust promotional activities and offering additional discounts.

PV sales may see mixed outcomes. The festive season, appealing schemes, and a good monsoon are likely to drive sales, but concerns remain over low consumer sentiment, heavy rainfall, and a lack of new product launches. High inventory levels are a significant risk, making it crucial for PV OEMs to avoid further stock increases to prevent financial strain on dealers. The CV segment faces a modest outlook, with positives like improved market reach and the festive season balanced by challenges such as poor freight rates and ongoing rainfall.

C. S. Vigneshwar, FADA vice president, expressed caution stating, "Inventory levels have surged to a historic high of 67-72 days, equating to INR 73,000 crore worth of stock. This poses a substantial risk for dealer sustainability, necessitating extreme caution. FADA urges PV OEMs to be vigilant about potential dealer failures due to these high inventory levels. It is also crucial for the Reserve Bank of India to mandate financial institutions to implement stringent checks before releasing inventory funding, preferably requiring dealer consent or collateral to prevent the escalation of NPAs. "

As per the report, the auto retail market is cautiously optimistic for the near term. Nonetheless, challenges such as heavy rainfall, high inventory levels in the PV segment, and economic uncertainties warrant caution. Effective inventory management and stringent financial checks are essential to sustain growth and mitigate financial risks, ensuring the stability and health of the auto retail sector.