Passenger car sales dip in August as dealers tackle rising inventories

August 2024 was a disappointing month for the auto sector in the country with passenger vehicle sales down 4.5 per cent year-on-year during the month. According to data released by the Federation of Automobile Dealers Association (FADA), sales of commercial vehicles and tractors also dipped in August. The only bright spot was the two-wheeler sector which witnessed a 6.3 per cent rise in sales.

FADA, which releases data of actual retail sales from showrooms versus the Society of Indian Automobile Manufacturers (SIAM) which puts out dispatches to dealers from auto factories, shows the auto sector has entered its autumn in August.

Passenger vehicle sales were down to 3.09 lakh units while tractor sales dipped more than 11 per cent to 65,478 units in August. Commercial vehicle sales, seen as a barometer of the economy, were also down 6 per cent on year at 73,253 units.

The biggest worry for dealers is the inventory for passenger vehicles which has risen to 70-75 days in August from 67-72 days in July. This means cars and SUVs are rolling off the showroom floor slower than before. This also leads to a considerable financial drain on dealers because the inventory makes up for a significant part of their working capital.

Despite the festive season set to begin in the first week of October, FADA has painted a grim picture of the auto sector. It sees September as being another washout month for the industry with the inauspicious ‘Shraddh’ period beginning on September 18 and continuing till October 2. An extended monsoon, according to FADA, will also play a spoil-sport especially in the rural sector. The association also says that slow construction activity and liquidity issues may hit commercial vehicle sales.

FADA however sees the festivals of Ganesh Chaturthi, Onam and Navratri breathing life into auto sales.

Earlier, SIAM data showed the top three auto makers in the country – Maruti Suzuki, Hyundai and Tata Motors posted a decline in sales in August. Increasing inventory levels at dealerships and subsequently rising discounts highlight the stress in the overall market.

Though, there has been some excitement in the market with three big launches in August - Mahindra's much anticipated Thar Roxx and a double coupe coup by Tata Curvv and Citreon Basalt.

September is also expected to be busy month with several new cars expected to be launched ahead of the festive period. These include the new Hyundai Alcazar, MG Windsor and the new Maruti Dzire along with several luxury products by Mercedes, Volvo and Lexus.