February retail sales see 2.6% increase, BS4 two-wheeler inventory cause of concern: FADA

Dealers are now facing a new challenge with Coronavirus cases being detected in India and alarming drop in customer walk-ins in auto showrooms.

February 2020 has turned out to be positive for the automotive industry as the retail sales (auto registration) during the month witnessed a growth of 2.6%. Except passenger vehicles, all the other segments of the industry saw growth in retail sales, said the Federation of Automobile Dealers Associations (FADA) on Thursday. Despite YoY growth, the overall retail sales were much below expectations as the expected pre-buying for the BS-IV stocks was not seen. Many customers held onto their purchase decision expecting sweeter deals towards end of March, FADA pointed out in a release.

On a YoY basis, overall vehicle registrations grew 2.60%. While two-wheeler was up by 1.52%, three-wheeler saw a growth of 20.7%. Registration of CVs was up by 13% and that of tractors up by 13.52% during the month. Only passenger vehicle segment reported a degrowth of 1.17%, FADA said. The total retail sales of the industry were higher at 17,11,711 units in February 2020 as compared to 16,68,268 units registered in the same month last year. On the inventory front, two-wheeler inventory of BS-IV vehicles remains to be a serious concern for FADA. “With the Supreme Court not considering our application for sale extension for BS-IV, the Federation seriously urges 2W OEMs to handhold the dealers for 100% liquidation of their BS-IV stocks,” it said.

FADA survey revealed a high number of 2W dealers will not be able to fully liquidate their BS-IV inventory and expressed inadequate support from their OEMs for 100% liquidation of this stock. With regards to PV and CV segments, the overall inventory has been at a reasonable level, but the challenge remains in slow moving, non-popular models as dealers look for adequate OEM support for liquidation of the same in March. FADA has already advocated for return of unsold BS-IV stocks and will be pursuing this for its members, If the need arises, as many dealers will be unable to sustain such losses, it said.

FADA president Ashish Harsharaj Kale said, “February turned positive for retail sales for most of the segments as the entire auto ecosystem, especially auto dealers, focussed on liquidation of their BS-IV stocks. Rural sales contributed for retail sales turning green with tractors also being in double-digit growth for 2nd month in a row.” On the March outlook, FADA said with banks and NBFCs getting into a cautious mode with regards to financing BS-IV stocks and many RTOs across the country prescribing their own cut off dates for permanent registration, retails of 100% of dealer inventory of BS-IV stocks continue to be a challenge.

Dealers are now facing a new challenge with Coronavirus cases being detected in India and alarming drop in customer walk-ins in auto showrooms. The overall uncertainty of the situation due to Coronavirus and the huge drops in the share markets, further contribute to the already weakened sentiment as purchase decisions are getting postponed, FADA pointed out. According to the Federation, BS-VI vehicles supply is also affected due to the Coronavirus situation in China and an already difficult transition becomes tougher due to unexpected happenings all around. Due to all this, the outlook for March is negative.

FADA would once again seriously urge the government for a relief package with temporary reduction in GST till return of stability and a financially attractive scrappage policy, which will not just reduce pollution on roads of older vehicles, but will also help in reviving CV sales, which currently is the worst hit segment. While the average inventory for the PV segment ranges from 10–12 days and that of 2W segment ranges from 20–25 days. The average inventory for CV ranges from 10–15 days, FADA said.

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