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Retail sales of passenger vehicles in India, including cars and SUVs, posted a 10 per cent jump to 3,20,129 vehicles in July this year compared to 2,90,564 in the same month last year, driven by new model launches and higher discounts, according to the Federation of Automobile Dealers Associations (FADA). 

“Dealers reported benefits from good product availability, attractive schemes, and a wider range of products,” the Federation of Automobile Dealers Associations (FADA) Vice President C S Vigneshwar said in a statement.

Heavy rains, low consumer sentiment, and intense competition posed challenges but dealers managed to sustain sales through strong promotions and incremental discounts, he added.

However, Vigneshwar also pointed out that the growth is accompanied by high inventory levels which have surged to a historic high of 67-72 days, equivalent to Rs 73,000 crore worth of stock.

“This poses a substantial risk for dealer sustainability, necessitating extreme caution. FADA urges passenger vehicle (PV) original equipment manufacturers (OEMs) to be vigilant about potential dealer failures due to these high inventory levels,” he stated.

Two-wheeler retail sales in July stood at 14,43,463 units, an increase of 17 per cent over 12,31,930 units in July 2023.

The segment experienced robust growth due to a thriving rural economy, the positive effect of a better monsoon, and the government’s support programmes enhancing rural incomes, Vigneshwar observed.

“The introduction of new products and better stock availability also contributed significantly, despite market slowdowns in certain regions, excessive rains, and increased competition,” he added.

Commercial vehicle (CV) retail sales grew 7 per cent year-on-year to 80,057 units last month.

“Positive factors included growth in the construction and mining sectors, while challenges such as continuous rainfall, negative rural market sentiment, poor finance availability, and high vehicle prices were also noted,” Vigneshwar said.

Tractor sales declined 12 per cent year-on-year to 79,970 units in July.

FADA, which collated vehicle registration data from 1,568 out of 1,645 RTOs across the country, noted that the near-term outlook across the auto retail segments shows a blend of optimism and caution.

Two-wheeler sales are expected to be buoyed by factors such as a growing rural economy, positive monsoon impacts and the introduction of new products. The festive season beginning after the Aadi festival and favourable agricultural conditions are also likely to contribute to increased sales.

On the other hand, heavy rainfall and inconsistent monsoon patterns may dampen demand in certain areas. FADA noted that the PV segment could see mixed results in the near term.

High inventory levels pose a significant risk and it is crucial for PV OEMs to avoid further increases in stock to prevent financial strain on dealers, FADA said.

The CV segment faces a modest outlook, with positive factors including improved market reach and the festive season, but challenges such as bad freight rates and ongoing rainfall pose a risk, it added.