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This article is more than 1 year old.

Spike in sales of entry level cars in Sep but dealers' body cautions against inventory build-up ahead of festive season

Mini

Passenger cars, particularly new launches and entry-level models saw growth, increasing by 9.81 percent, for the first time since the COVID-19 lockdown.

Spike in sales of entry level cars in Sep but dealers' body cautions against inventory build-up ahead of festive season
While September month saw many automakers report double-digit growth in their wholesale dispatches, the retail picture is not very much aligned to that story.
According to the data released by the apex auto dealers' body in India, vehicle registrations fell by over 10 percent in September month on a year-on-year basis.
The decline was led mostly by commercial vehicles, three-wheelers, and two-wheelers, whereas, passenger cars, particularly new launches and entry-level models saw growth, increasing by 9.81 percent, for the first time since the COVID-19 lockdown.
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However, despite the greater part of September falling under what's considered an inauspicious period for new big-ticket purchases, the month was an improvement of 11.45 percent in sales over August.
"Overall, two-wheeler, three-wheeler, and commercial vehicles continued to march ahead on MoM basis and inched up to narrow their gap with last year’s sale even though pre-COVID levels are yet to be seen across all categories," the Federation of Automobile Dealers' Association (FADA) said.
On a yearly basis, two-wheeler registrations shrunk by 12.62 percent, three-wheelers by 58.86 percent, and commercial vehicles by 33.65 percent, according to data compiled by FADA.
It is important to note the base effect from the year 2019 which was also marked by a slowdown in the auto sector owing to factors of an impending transition to the BS-VI regime, poor liquidity in the hands of buyers, and poor sentiment.
But, the tractor sector continued to buck the negative trend, recording an impressive growth of 80.39 percent in retail sales on the back of record Kharif sowing.
While passenger cars in the entry-level segment saw good demand due to factors of social distancing as the new normal, the government's push to open up urban areas and ease of obtaining vehicle financing, as well as new launches and a better product mix, auto dealers are cautious of inventory build-up in the event festive sales are not as positive as anticipated.
Dealers draw on inventory build-up last festive season, advise "extreme" caution
According to FADA, inventory levels for both two-wheelers and passenger vehicles are at record levels ahead of the festive season, which will spill over October and November this year.
"Inventory for two-wheelers stands at 45-50 days and passenger vehicles stand at 35-40 days. Any dampener in vehicle sales during the upcoming festivals will have a catastrophic impact on dealers financial health," FADA said in its September sales report.
It said, "FADA thus once again advises extreme caution to both OEMs and the dealers to avoid building any further inventory as this may lead to a disastrous situation similar to last two festive seasons when sales were below the mark."
The festive season and state elections approaching in Bihar may exacerbate the risk of infection, potentially playing spoilsport in the specific region, it added.
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