Automobile Sales In India See A Fair Decline In The Start Of The New Financial Year!

Dealer liquidity and access to working capital remain negative, thus affecting the automobile sales adversely

Things are not so good for the Indian automotive industry at the start of the new financial year. The Monthly Vehicle Registration Data for the month of April, released by the Federation of Automobile Dealers Associations (F A D A),  tell us but the same.

Commenting on April’19 performance, F A D A President, Mr Ashish Harsharaj Kale said, “The month of April ended on a negative note. Amongst the Categories on a YoY basis, Commercial Vehicles and Three Wheelers, which registered highest growth during FY’19 witnessed highest fall in the month of April, while 2W and PV De-grew -9% and -2% respectively.”

April 2018 had had a very strong base, and thus provides for a considerable de-growth this time around. The commercial vehicle segment, however, has had a growth of 2% on a MoM basis.

Commenting further F A D A President said, “The Near Term Outlook Continues to be Negative to Neutral with the absence of any immediate positive triggers which could affect Retail Sales. Despite the Current Negative Retail Situation, which we expect to Continue for the next 8-12 weeks, we still believe that the Outlook for Auto Retail can soon turn positive if below mentioned triggers turn positive:

  • A stable Government with Continued Development Focus
  • An average to above average monsoons with an even spread.
  • Continued easing of liquidity by Reserve Bank of India”

The dealer inventory levels continue to remain high and requires further correction than done in recent months. FADA is said to advocate for a leaner dealer inventory of 21 days (15days Inventory + 7days of In-Transit Inventory) for its members, thus providing for a fair reduction in cost.

Consumer liquidity for April has seen marginal improvement but still continues to be tight and far from the normal marks.

On Dealer Liquidity Mr Kale Commented, “F A D A is Extremely Concerned at the Dealer Liquidity which Continues to remain Very Very Tight and Access to Working Capital for Dealers has reduced Further with the Banking system taking a Negative View towards Auto Retail in the Current Circumstances”

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