The Indian auto retail sector witnessed a double digit growth of 13.84% Year on Year (YoY) in July 2024 backed by a robust 17.17% YoY growth in Two-Wheelers (2W) sales. However, high inventory pile-ups at dealerships have caused ‘significant’ concern.  

During the month Three-Wheelers (3W) sales increased by 12.88% YoY, Passenger Vehicle (PV) rose 10.18% YoY and Commercial Vehicles (CV) grew 5.93% YoY. But Tractors sales saw a significant YoY decline of 11.95% according to sales numbers released by Federation of Automobile Dealers Associations (FADA). 

“This growth is accompanied by a significant concern. Inventory levels have surged to a historic high of 67-72 days, equating to Rs 73,000 crore worth of stock. This poses a substantial risk for dealer sustainability, necessitating extreme caution,” FADA said.

FADA has urged PV OEMs to be vigilant about potential dealer failures due to these high inventory levels. “It is also crucial for the Reserve Bank of India to mandate financial institutions to implement stringent checks before releasing inventory funding, preferably requiring dealer consent or collaterals to prevent the escalation of NPAs,” the auto dealers’ body said in a statement.

“Following a deficient June, monsoons in India have intensified, resulting in above-normal cumulative rainfall for July. However, the geographical distribution was uneven. Despite these challenges, India’s automobile retail sector saw a YoY growth of 13.84%, with almost all categories witnessing an increase,” said C S Vigneshwar, Vice President, FADA. 

On the near term outlook FADA said, “The auto retail market is cautiously optimistic for the near term, driven by positive monsoon effects, the festive season, and some product introductions.”