Liquidity is one of the important factors impacting auto sales as all commercial vehicles, eight out of 10 passenger vehicles, and around half all two-wheelers are financed by banks and NBFCs.
Sales of passenger cars and two-wheelers are going through a prolonged downturn as economic growth has slipped to a five-year low, income growth has slowed down, rural demand is weak, and lending institutions, especially the non-banking financial companies (NBFCs), are facing liquidity crunch. Passenger car sales fell for the 12th consecutive month in June, barring October last year, and two-wheeler sales collapsed for seven months in a row, data from SIAM show.
Even vehicle registration tracked by the Federation of Automobile Dealers Associations, a better indicator of retail vehicle sales, fell 6% across segments in the three months to June this year. The dealer association underlined that while the passenger vehicle inventory has eased slightly, commercial vehicle and two-wheelers’ inventory has risen.
Liquidity is one of the important factors impacting auto sales as all commercial vehicles, eight out of 10 passenger vehicles, and around half all two-wheelers are financed by banks and NBFCs. Vehicle loan growth in May slowed to 5.7% y-o-y from 10.4% last year as lenders have become cautious in both retail and dealer financing.
Over the past five years, the size of pre-owned market has expanded significantly, with higher share of organised players. Higher growth in pre-owned cars over the past two years is a reflection of rising consumer interest in this segment, which is also impacting sales of new vehicles.