Automobile retail sales likely to pick up during ongoing festive season: Ind-Ra

29 Oct 2019 Evaluate

Expressing optimism over automobile retail sales, India Ratings and Research (Ind-Ra) in its latest report has said that retail sales of automobile are likely to pick up with an improvement in consumer sentiment during the ongoing festive season due to recent liquidity easing measures announced by the government and on back of favourable monsoons. It said consequently, inventory build-up at the dealer level in anticipation of increased demand during this period is likely to lead to increased wholesale billing by original equipment manufacturers (OEMs) during October.

However, the rating agency in its credit news digest on India's auto sector has said that production cuts by OEMs are likely to continue in the near-term with existing high dealer inventory levels. It highlights trends in sub-segments of auto sector including passenger vehicles (PVs), commercial vehicles (CVs) and two-wheelers (2Ws) with a focus on sales volumes growth, market share movement, change in commodity prices and recent rating actions.

As per the report, domestic automobile industry's sales continued their downward trend in September with a 22% year-on-year decline on weak consumer sentiments owing to the slowing economy. Inventory at dealer level remained high, leading to most OEMs continuing to implement production cuts. Over April to September, overall auto industry undertook a production cut of 13% year-on-year with 16%, 27% and 13% production cuts in PV, CV and 2W segments respectively.

The average inventory for PVs increased marginally in September to 30 to 35 days from 25 to 30 days in August. The average inventory for CVs decreased marginally in September to 50 to 55 days from 55 to 60 days in August. But, the average inventory for 2W remained high at 60 to 65 days. PV sales volume declined 24% on account of a 33% drop in the sales volume of cars. CV sales volume declined 39% in September owing to decreased industry demand on account of tight liquidity conditions amid slowed economic activity. 2W sales fell 22% on weak rural and semi-urban demand.

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