Slowdown bites: Auto sales see steepest slump in two decades

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Published: August 14, 2019 3:39:07 AM

Analysts said higher inventory levels are likely to stay the same in the near term as retail is not picking up due to lack of easy credit availability.

The fall in PV sales in July was also the ninth consecutive month of decline. (Representational image)The fall in PV sales in July was also the ninth consecutive month of decline. (Representational image)

Poor retail sales due to weak consumer demand, which has left dealers saddled with high inventory, saw automobile sales across segments witnessing their sharpest decline in nearly 19 years in July, dropping 18.71% on a year-on-year basis.

Vishnu Mathur, director general, Society of Indian Automobile manufacturers (Siam), said car and motorcycle manufacturers have slashed about 15,000 jobs — mostly temporary and casual workers — in the last three months.

According to data released by Siam on Tuesday, vehicle sales across categories, including passenger vehicles (PVs) and two-wheelers, stood at 18,25,148 units last month as against 22,45,223 units in July 2018.

The previous biggest drop across overall domestic automobile sales was recorded in December 2000 when it fell 21.81%. Similarly, domestic PV sales also saw the biggest fall in nearly 19 years, slumping by 30.98% to 2,00,790 units compared to 2,90,931 units in the same period a year ago.

Previously, the worst decline was registered in December 2000, when wholesales had fallen 35.22%.

The fall in PV sales in July was also the ninth consecutive month of decline.

According to estimates of Federation of Automobile Dealers Association (FADA), around 200 dealer showrooms of passenger vehicles have downed shutters in the last one year, leading to job losses of around 25,000.

Analysts said higher inventory levels are likely to stay the same in the near term as retail is not picking up due to lack of easy credit availability. “Our industry checks indicate that retails have also declined and inventory levels might remain elevated,” analysts at Nomura said, adding that since economists see downside risks to the GDP growth, the recovery is likely to be slower than the initial expectations.

“The data show how urgent the need is for a revival package from the government. There is dire need for some kind of action. The industry is doing all it can to promote sales. I think this is the time when the industry really needs the support of the government coming out with a revival package,” Mathur said, adding that the package is necessary to arrest fall in sales and to bring back the industry on growth path.

Speaking to a business news channel, Maruti Suzuki India chairman RC Bhargava said: “Every five years, there is a downturn. It happened in 2008-09, 2013-14 and 2018-19. It is a five-year cycle which seems to have been happening in the last 10 years. All the extra costs and changes in regulation and rules have unfortunately come in the year when the downturn was happening. It is just unfortunate that the timing of all these events has coincided with the periodical downturn.”

The auto industry has sought reduction in GST rate, introduction of vehicle scrappage policy, revival of NBFC sector as sales are mostly dependent on availability of finance and delay in implementation of the proposed increase in vehicle registration fees.

Total two-wheeler sales in July declined 16.82% to 15,11,692 units compared with 18,17,406 units in the year-ago month. Commercial vehicle sales were down 25.71% to 56,866 units in July against 76,545 units in July 2018.

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