New vehicle registrations plunge 36% in July; PV retail sales down 25.19%

Tractor, small commercial vehicle and motorcycle sales positively impacted with the monsoon progress and spread
Passenger vehicle (PV) retail sales dropped by 25.19 per cent to 157,373 units in July 2020, from 210,377 units a year ago. Two-wheeler sales dropped by 37.47 per cent to 874,638 units from 1,398,702 units. Total auto vehicle registrations dropped by 36.27 per cent to 1,142,633 units from 1,792,879 units, a year ago. Tractors were the only category to buck the trend. Their sales were up 37.24 per cent to 76,197 units in July 2020 from 55,522 units a year ago, according to data from The Federation of Automobile Dealers Associations (FADA).

Dealers have said that the full-year outlook remains negative with a projected contraction in retail sales of 15-35 per cent across segments, save tractors, which look set to clock a positive annual growth.

FADA President Ashish Harsharaj Kale said, "As India continues to open up, the month of July saw better registrations compared to June, though on a YoY basis, auto sector recovery is yet to be seen anywhere near normal. Current market conditions are still not indicative of the actual demand situation on an all India level and retails continue to de-grow in huge double digits despite the low base of last year."

The rural market, however, continues to show strong growth as monsoon continues its good spell. Tractor, small commercial vehicle and motorcycle sales positively impacted with the monsoon progress and spread.

Banks and NBFCs, though flush with high liquidity, are still cautious about funding auto retail, affecting demand revival especially in segments of CV, 3W and 2W. The vehicle funding percentage has fallen by 10-15 per cent in many segments, increasing the initial contribution beyond the reach of many customers intending to buy.

The Indian auto industry and its eco-system of suppliers, OEMs and dealers can have a huge positive impact on consumer sentiment by return to pre-Covid Volumes.

"FADA has once again appealed to the government to announce demand-boosting policies to ensure speedier Auto recovery. The industry eagerly awaits an incentive-based scrappage policy, which will boost medium & heavy commercial vehicle sales," said Kale.

He added that if there are no further lockdowns, especially in auto hubs, the outlook for the current month is positive in comparison to July.

"The month of August ushers the beginning of the long festival season. With Onam and Ganesh Chaturthi in the next few days. FADA hopes that the Auto Industry will start its recovery journey in a linear manner, Kale said. "Extreme Caution is required by OEM’s towards wholesale billing being in tune with retail sales to avoid Dealer Inventory build-up."

"With retail sales still at 60-70 per cent levels YoY despite the low base of last year, dealers are battling on many fronts to navigate through this unprecedented crisis and disproportionate inventory. The excessive interest cost could further put many on the border of business survival," said Kale.

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