Industry body says auto sector in de-growth mode; urges centre, RBI to ease liquidity for NBFCs

Updated : November 23, 2018 02:11 PM IST

Unexpected de-growth during festival erases strong growth achieved till September, says FADA

Positive sales growth at FY end still a possibility, as consumer interest intact, says FADA

Postponement of purchase by consumers and the resultant inventory increase a big concern for auto dealers, says FADA

Confirming the fears that festive season uptick witnessed by the automobile industry is difficult to sustain, the Federation of Automobile Dealers Associations (FADA) on Friday asked the government and the Reserve Bank of India (RBI) to further ease of liquidity for auto non-banking finance companies (NBFCs).

The industry body said the higher de-growth was seen in the Navratri and Dussehra festivals, especially in two-wheelers and passenger vehicles segment.

“With fuel prices starting their downward trend in October end, Diwali season saw a sales uptick, especially in two-wheelers. But overall, we have seen unusual de-growth during the combined festive period, both in two-wheelers and passenger vehicles. Dealer inventory levels in both these segments have risen substantially as a result of this and is a matter of great concern,” FADA said in a press release.

However, commercial vehicle sales have been growing at a very good rate. But some demand softening could be seen in commercial vehicles too as the growth percentage has come down during this period, industry body said.

FADA president Ashish Harsharaj Kale said, “We have not seen such a dull festive season, in the past few years as many negative factors came into play during this season, which weakened the consumer sentiment and postponed their purchase decision. It’s a matter of deep concern for our dealership community.”

Further, it said during the 42 days festive period (October 18, 2018 to November 10, 2018 ) and on year-over-year (YoY) basis, total vehicle registrations fell by 11 percent, two-wheelers fell by 13 percent and passenger vehicles fell by 14 percent. Three-wheelers and commercial vehicles held some ground and grew by 10 percent and 16 percent.

For the current financial year up to November 20, 2018 and on YoY basis, total vehicle registrations has grown around 6 percent, two-whelers by 5 percent, three-wheelers by 53 percent and commercial vehicles by 30 percent. Passenger vehicles over the same period has de-grown by more than 1 percent.

The FADA also batted for automobile NBFCs, saying that they are one of the key growth drivers in auto retail and are also operating in a less riskier business environment than infrastructure and housing NBFC’s due to the short repayment cycle of auto loans and the mobility of the assets.