Companies

Retail auto sales to remain on slow lane in ‘inauspicious’ September

Nandana James Mumbai | Updated on September 19, 2020 Published on September 18, 2020

In August, passenger vehicle sales were up 14.16 per cent year-on-year, while FADA numbers show a 7.12 per cent drop

Automobile retail sales is expected to be muted in September, despite it being at the cusp of the festival season, due to certain aspects of this year’s Hindu calendar, like the confluence of the ‘shradh’ and the ‘adhik maas’ period. Considered an inauspicious time, consumer sentiments will be subdued during this 45-day period, said industry officials and analysts.

With automobiles being a discretionary purchase, positive sentiments is an important factor in driving sales.

This year, after the 15-day shradh period from September 2 to 16 - which is considered inauspicious - there will be an additional 30 days known as the ‘adhik maas’, also considered inauspicious, Shashank Srivastava, Executive Director (Marketing and Sales), Maruti Suzuki India told BusinessLine.

Cyclical phenomenon

“This comes every 3.5 years, but once in 19 years, it comes together with the shradh period - it last happened in 2001,” he explained. But, the sentiments during the adhik maas period would be better than the shradh period, he said.

People traditionally buy less during the shradh period, affirmed Yadvinder Singh Guleria, Director – Sales & Marketing, Honda Motorcycle & Scooter India (HMSI). “Unfortunately, this year, we have an additional 30 days of almost no activity in terms of positive buying sentiments (post shradh). Earlier, when shradh is over, you enter into ‘navratras’, but this year, the navratras will only start from mid-October. But, this does not mean sales will not happen during these 30 days. Even in shradh, India was buying. But it is not the festival month immediately after the shradh period,” explained Guleria.

Festival optimism

But, due to production levels normalising, the supply chain issues getting resolved, the opening up of businesses post the stringent lockdown of the previous months, as well as the anticipation of good sales during the festival season that will follow, the wholesale despatches by automakers will be good, said industry players.

“In September, while despatches (wholesales) will keep happening, retail sales will be slow. Wholesales will be higher than retail in September. So, you could expect that the stock levels at dealerships will keep rising and later on when the good period (festive season) starts, the stock will correct downwards,” said Srivastava.

Vinkesh Gulati, President, FADA, said “We expect September to be similar to August or tad lower”. As per data released by FADA in August, which is based on the vehicle registration data available on the government portal Vahan, the total automobile retail sales during the month fell 26.81 per cent year-on-year.

According to SIAM data (of wholesale despatches), in August, passenger vehicle sales were up 14.16 per cent year-on-year, while FADA numbers show that PV sales fell by 7.12 per cent.

Similarly, in the two-wheeler segment, going by SIAM numbers, sales were up 3 per cent y-o-y in August, while FADA said sales to customers fell 28.71 per cent.

“We expect inventory build-up at dealer level to continue in September, however, retail sales are expected to be lower during the month, owing to shradh period in the first half of September. Dealers are expected be able to liquidate the built-up volumes in October and November...,” said Hetal Gandhi, Director, CRISIL Research.

“India Ratings expects retail demand to get a temporary boost during the upcoming festival season. Meanwhile, OEMs are likely to continue with higher wholesale billings in September as well, although retail sales are only likely to pick-up substantially during October-November,” said Ind-Ra in the report on Friday.

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Published on September 18, 2020
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