Automobile slump: Confidence remains elusive; car sales skid 4.6% in Jan

Sales of vehicles have continued to decline, with auto dealers saying that confidence is yet to return among buyers as many customers are holding back their decision to buy cars.

However, green shoots are visible especially in rural areas, with tractor sales showing an uptick. Retail sales of vehicles declined by 7.13 per cent year-on-year (YoY) in January to 290,879 units, according to the data released by Federation of Automobile Dealers Associations (FADA), the apex body of auto dealers on Thursday.

Retail sales are typically subdued in January after a brisk business in December. However, subdued consumer sentiment and persistent slowdown in the economy have added to the drop in demand this year.

“Auto sales continued to be in the negative territory in January, except for three-wheelers, with many consumers not buying any vehicle,” said FADA President Ashish Kal, adding that the transition to BS-VI emission norms also delayed purchases.

Retail sales of passenger vehicles, the largest component of the pie, fell by 4.61 per cent YoY in January to 290,879 units, according to FADA data.

January was the second consecutive month of decline in showroom sales of passenger vehicles after two months of marginal recovery in October and November, when automakers had offered record discounts to entice customers. However, with a dip in economic activity and overcapacity with fleet owners on account of an increase in freight carrying capacity of trucks, sales of heavy commercial vehicles slumped 6.89 per cent to 82,187 units in January.

Most manufacturers witnessed decline in wholesales last month as production was reduced to control inventory of BS-IV emission norm-compliant vehicles and gradual increase in dispatches of BS-VI compliant units at dealerships. The new emission norms will be effective from April 1, 2020.

“With weak demand situation, liquidation of inventory of BS-IV vehicles is the top focus for dealers and FADA has already appealed to all manufacturers to switch over completely to BS-VI vehicles.

The past 14 months have seen one of its toughest times in auto sales. Therefore, FADA has requested original equipment manufacturer’s (OEM’s) that any BS-IV vehicle billed further, which is not against specific customer orders, to be returned to avoid financial loss to dealers,” Kale said.

Consumption slowdown in rural markets and an increase in prices of scooters and motorcycles because of hike in insurance costs led to an 8.8 per cent YoY fall in sales of two-wheelers to 1,267,366 units during January.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel