The dim outlook for India’s automobile sector is likely to continue well into 2019 as unsold vehicles swelled, while new car registrations saw a decline in the October-December quarter, according to a note by Target Investing.

Dealer inventory during October to December 2018 was at an average 552,616 vehicles per month, doubling from 275,522 in the same period a year earlier, Target said in the report.

Registrations for new cars, two-wheelers and three-wheelers declined. Target used registration information collected from regional transport offices in 30 states and territories and data from Society of Indian Automobile Manufacturers, the industry body.

There is a clear consumer demand slowdown as there is a reduction in registrations across the segments, Sameer Kalra, founder of Target Investing in Mumbai, wrote in the report. Original Equipment Manufacturers or OEMs will cut production for a third month in a row, which will cause a big worry for automobile ancillary companies, he wrote.

Highlights from the report:

* October-December dealer inventory of commercial vehicles climbed 98% year-on-year, highest in 11 quarters; for cars, it swelled 68% while unsold stock of two-wheelers climbed 113% year-on-year

* Car registrations were down 11.7%, two-wheelers fell 9.8% and three-wheelers slid 4.3%

* Slower sales and rising unsold inventory led to forced production cuts at OEMs

* December 2018 production numbers showed a 1% drop in overall vehicles, falling for a second month

* A shift to stricter emission norms for vehicles and dealer financing will be two major events that may impact production going forward

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