Heatwave takes its toll! Passenger vehicle sales dip 6.7% on-year in June, says FADA

The Federation of Automobile Dealers Associations (FADA) painted a not-so-cheery picture of auto sales for the month of June. According to FADA data, June saw a negligible growth of just 0.73 per cent year-on-year, while passenger vehicle sales saw a dip. 

Passenger vehicle sales dipped 6.7 per cent, as well as tractors and commercial vehicles that saw a dip of 28.3 per cent and 4.7 per cent on-year respectively. However, the slight growth in overall auto sales was driven by two-wheeler and three-wheeler segments that saw on-year growths of 4.66 per cent and 5.1 per cent respectively. 

FADA President Manish Raj Singhania said, “June is traditionally one of the weakest months for India’s auto retail. This year, while the monsoon progressed normally up to Maharashtra, it lost momentum, delaying rains in West Bengal, Bihar, Uttar Pradesh, Chhattisgarh, and Madhya Pradesh. This exacerbated the effects of a severe heatwave in northwest India, contributing to a prolonged hiatus that not only intensified the heatwave but also delayed the sowing operations of kharif (summer sown) crops in northern and north-western regions, thereby impacting rural sales.” 

When it comes to month-on-month sales, two-wheelers saw a decline of 10.36 per cent. “Factors such as extreme heat which resulted in 13 per cent less walk-ins, stalled monsoons and election-related market slowdowns particularly affected rural sales, which fell from 59.8 per cent in May to 58.6 per cent in June,” said Singhania. 

Passenger vehicle sales declined 7.18 per cent month-on-month, while inventory levels have reached an all-time high, ranging from 62 to 67 days. Singhania said that market sentiment remains subdued due to the extreme heat, resulting in 15 per cent less walk-ins, as well as delayed monsoons. 

Commercial vehicle month-on-month sales also decreased by 12.42 per cent, due to delayed monsoons and poor market sentiment. 

The FADA president urged caution for OEMs considering the festive season is still some time away. “Effective inventory management strategies are essential to mitigate financial strain from high interest costs. FADA strongly urges PV OEMs to implement prudent inventory control and engage proactively with the market,” he said. 

WILL MONSOON IMPACT AUTO SALES IN JULY? 

With the Southwest Monsoon covering almost the entire country, kharif sowing has witnessed a boost. Disposable incomes are also expected to be improved due to government’s increase in minimum support prices (MSPs) for kharif crops, which in turn is expected to positively impact rural India auto sales. 

Nevertheless, dealers of two-wheeler, passenger vehicle and commercial vehicle segments, while anticipating better sales, have also expressed concerns over low customer inquiries and market sentiment dampened by heavy rains.

Two-wheeler sales are expected to get a boost due to the monsoon even as “challenges such as agricultural cash flow constraints and regional market variations remain”. As for passenger vehicles, “high inventory levels and ongoing low market sentiment necessitate cautious management”. Renewed infrastructure projects and seasonal demands are expected to drive the potential growth for the commercial vehicle sector. 

“Based on current market conditions, the overall rating for July auto retail performance is cautiously optimistic with a moderate outlook. While some segments may see improved activity, overall growth is likely to be tempered by persistent challenges,” the association said.