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 India's retail vehicle sales fell 7.7% from a year earlier in October, a dealers' body said on Monday, adding that a build-up of inventory of passenger vehicles (PV) was a cause for concern.

The average inventory for the PV segment ranged from 63 days to 66 days in October, an all-time high, the Federation of Automobile Dealers Association (FADA) said. Inventory days refers to the average number of days it takes to sell a unit.

Unless the stock is liquidated during the Diwali festival, when Indians generally make increasingly large-ticket purchases, automobile retailers would be hurt, FADA President Manish Raj Singhania said in an interview.

"Year-end discounts and the year-change of models will further distress dealers in terms of discounting while offloading these vehicles in the market," Singhania added.

ENTRY-LEVEL DISTRESS

High inflation, coupled with the weakest monsoon since 2018 in India, has made vehicles less affordable for the country's rural population.

Entry-level vehicles from companies such as India's top carmaker Maruti Suzuki, Tata Motors, and Kia Corp contributed most to the inventory build-up. Demand for sports utility vehicles continued to soar.

FADA, which provides monthly data about dealer sales, has now suggested to automakers, including Maruti, that they implement more aggressive sales schemes and moderate vehicle dispatches.

"Original Equipment Manufacturers need to understand that they cannot keep pushing a certain number of a certain model," he said.

"If some models are not selling or the market is not responding well, they need to refocus their manufacturing to models that are in good demand."

Retail sales in the PV segment skidded 1.4% in October to 353,990 units from a year ago, said FADA.

The industry body is counting on Diwali and the harvest season to boost demand and sees November retail sales rising 10%-15% across segments, led by three-wheelers and two-wheelers, Singhania said.

"Agriculture produce started coming in November and the government has raised the minimum selling price of produce -all of this will ensure that money finally gets in the hands of farmers," he said.