With Onam and Ganesh Chaturthi falling this month, there are hopes that the auto industry will start its recovery journey in a linear manner, the Federation of Automobile Dealers Associations (FADA) said on Monday.

However, it also said original equipment manufacturers (OEMs) should take ‘extreme caution’ to ensure wholesale billing is in tune with retail sales to avoid dealer inventory build-up.

“With retail sales still at 60-70 per cent levels year-on-year (YoY) despite the low base of last year, dealers are battling on many fronts to navigate through this unprecedented crisis and disproportionate inventory. The excessive interest cost could further put many on the border of business survival,” it said.

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According to its latest monthly report, the retail sales of passenger vehicles declined 25 per cent YoY to 1,57,373 units last month (against 2,10,377 units in July 2019).

Retail sales of two-wheelers fell 37 per cent to 8,74,638 units (13,98,702 units).

Commercial vehicle sales plunged 72 per cent to 19,293 units (69,338 units).

Sequential growth

“As India continues to open up, the month of July saw better registrations compared to June, though on a YoY basis auto sector recovery is yet to be seen anywhere near normal. Current market conditions are still not indicative of the actual demand situation on an all-India level and retails continue to de-grow in a huge double digit despite the low base of last year,” said Ashish Harsharaj Kale, President, FADA.

Even so, rural markets continued to show strong growth as the monsoon continues its good spell. Tractors, small commercial vehicles and motorcycle sales were positively impacted, he said.

He also pointed out that the vehicle funding percentage has fallen by 10-15 per cent in many segments, increasing the initial contribution beyond the reach of many customers.

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