Excessive Rainfall Hampers India's Auto Retail Sales in August 2024, FADA Report Reveals

Auto retail sales in India saw a notable 7.01% decline in August 2024, primarily due to excessive monsoon rains. Despite the monthly drop, a modest 2.88% year-on-year growth was observed. Key segments faced challenges from weather disruptions, market saturation, and high inventory levels, impacting cash flow and profitability.

Auto retail sales in India experienced a significant decline in August 2024, attributed mainly to excessive monsoon rainfall, according to a report by the Federation of Automobile Dealers Associations (FADA). The report documented a 7.01 percent month-on-month decline in retail auto sales, dropping from 20.34 lakh units in July to 18.91 lakh units in August. However, a modest 2.88 percent year-on-year growth was observed compared to August 2023.

"India saw 15.9 percent excess rainfall, with a notable surplus in key regions, disrupting auto retail performance," the report stated. The two-wheeler segment, though showing a 6.28 percent year-on-year growth, registered a 7.29 percent month-on-month decline, with market saturation and adverse weather being cited as the primary factors for the drop.

In the passenger vehicle segment, a decline of 4.53 percent year-on-year and 3.46 percent month-on-month was reported, while the commercial vehicle segment saw an 8.5 percent month-on-month and 6.05 percent year-on-year drop. FADA attributed the significant drop in commercial vehicle sales to weak industrial demand and weather-related challenges. The report also highlighted growing inventory challenges in the passenger vehicle segment, with stock days ranging between 70-75 days, equating to approximately 7.8 lakh vehicles valued at Rs 77,800 crore.

High inventory levels and aggressive OEM dispatches have placed financial strain on dealers, impacting their cash flow and profitability, according to the report. "Dealers are under pressure due to aggressive OEM dispatches, leading to cash flow issues and reduced profitability," it noted.

In response, FADA has urged banks and NBFCs to tighten funding for dealers with excessive inventory. The report emphasized the importance of recalibrating supply strategies between dealers and OEMs to avoid a potential inventory crisis. While the upcoming festive season presents growth opportunities, the report noted that the auto retail market must navigate challenges from weather uncertainties and inventory management. Strategic planning, inventory control, and targeted marketing will be essential to leverage festive demand while mitigating ongoing pressures. (ANI)

(With inputs from agencies.)