In August 2024, India’s retail car sales dropped by 4.53% year-on-year, reaching 310,000 units, according to data released by the Federation of Automobile Dealers Associations (FADA) on Thursday. The figures were sourced from the government’s VAHAN website. Compared to the previous quarter, car sales saw a decline of 3.46%.
Weather conditions impacted sales
FADA President highlighted that unpredictable weather conditions during this monsoon season played a significant role in the drop in sales. The monsoon arrived late, following a heatwave, and then caused heavy rainfall in various regions, leading to flooding in some areas. These weather challenges directly impacted India’s auto retail market, resulting in only 2.88% growth during August.
Motorcycle and scooter sales increased
Despite the challenging weather, motorcycle and scooter sales grew by 6.3% year-on-year, reaching 1.34 million units. However, sales dropped by 7.29% compared to the previous month due to market saturation and rain-related disruptions.
Decline in commercial vehicles sales
Commercial vehicles, however, suffered a significant drop, with monthly sales falling by 8.5% and a year-on-year decline of 6.05%, primarily due to weak demand and adverse weather conditions.
Key Retail Sales Data:
– Car sales: 4.53% decline to 310,000 units (YoY)
– Two-wheeler sales: 6.3% increase to 1.34 million units (YoY)
– Three-wheeler sales: 1.6% rise to 105,000 units (YoY)
– Commercial vehicle sales: 6.1% decline to 73,253 units (YoY)
– Overall retail sales: 2.9% growth to 1.89 million units (YoY)
Inventory challenges
The drop in retail sales has worsened inventory problems for dealerships. Automakers claim they are producing vehicles based on demand, but unsold inventory at dealerships across India has reached ₹77,800 crores ($9.27 billion), equating to 7.8 million vehicles or 70-75 days of inventory.
Dealers are now looking toward the festive season with cautious optimism. FADA expects that festivals such as Ganesh Chaturthi, Onam, and Navratri will boost consumer sentiment, particularly in urban areas. Moreover, good rainfall in some regions has aided farming, which could increase rural demand post-monsoon.
Concerns for the festive season
India’s auto dealers are concerned about the upcoming festive season due to leftover inventory and uncertainties in consumer spending. Many fear that they may need to offer deeper discounts to drive demand, which could hurt their profit margins. The record-high inventory levels and increasing discount expectations have created a challenging scenario for dealerships.
The automotive sector is a significant contributor to India’s economy, accounting for 7% of GDP, and is often viewed as a key indicator of private consumption trends in the country. While overall consumer spending hit a seven-quarter high in April-June, the drop in car sales suggests caution among buyers.
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