Inventories surge as retail auto sales plunge in February

High inventory is also expected to raise dealerships’ working capital needs, with FADA saying that this would be unsustainable if demand remains suppressed.  

Published: 15th March 2019 10:20 AM  |   Last Updated: 15th March 2019 10:20 AM   |  A+A-

By Express News Service

After witnessing a significant jump in January, domestic automobile retail sales declined 8.06 per cent year-on-year in February 2019, the Federation of Automobile Dealers Association (FADA) said in a report. 

Sales of passenger vehicles (PV) dipped 8.25 per cent to 2.15 lakh in February, as compared to 2.34 lakh units sold in the same month last year, while retail sales of two-wheelers (2W) went down by 8 per cent to 1.12 million units against 1.22 million sold last year. Sales of commercial vehicles also declined by 7 per cent to 61,134 units during the month compared to 65,789 units in the corresponding month last year.
“After a spike in PV sales in January, which was largely due to year-end stock clearance getting extended and a few new launches which generated some excitement, the industry is once again witnessing a downward trend as February turned out to be one of the slowest months for auto retail during this financial year,” Ashish Harsharaj Kale, president, FADA, said. 

Owing to the decline in demand, automotive dealers across the country have reported high inventory days for their current stock. According to FADA, PV inventory levels saw a sharp rise to 50-60 days during February from 35-40 days in January. Two-wheeler inventories, on the other hand, have reached an alarming level of 90 days from just 55 days a month ago. 

“Given the current environment, FADA urges our manufacturers to take a realistic stock of the current retail situation, and recalibrate their production to regulate dealer invoicing in these two months to facilitate return to stock normalcy for dealerships to maintain a sustainable business environment till the industry again hits the high growth trajectory,” Kale added. 

The sharp rise in insurance costs, difficulty in availing loans, rising fuel costs and a general dip in buyer sentiments have impacted retail volumes, with experts saying that with general elections around the corner,  it is unlikely the situation improve in the next few months. High inventory is also expected to raise dealerships’ working capital needs, with FADA saying that this would be unsustainable if demand remains suppressed.  

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