In what appears to be green shoots of recovery for PV segment, car sales have registered positive YoY growth for the second consecutive month in November 2019. Federation of Automobile Dealers Associations (FADA) has reported that a total of 2,72,168 vehicle registrations were recorded in November, which translates into YoY growth of 6.51%. The figures for same month last year stood at 2,55,535 units.
FADA has pointed out a number of factors that could have boosted PV sales in November 2019. One of these is the increased demand from rural areas, where cash flow has increased with sales of new crops and agricultural produce. Prolonged spells of rains had affected standing crops and reduced cash flow in rural areas in earlier months. According to FADA, the situation has also improved in semi-urban areas.
The top three contributing states in November were Uttar Pradesh, Maharashtra and Gujarat with sales of 36,383, 36,187 and 23,427 units, respectively. While UP and Maharashtra recorded positive YoY growth of 23.92% and 6.19%, Gujarat registered negative growth of -21.67%. In the top ten contributors list, four states have registered negative YoY growth. Top 5 states managed to have a share of 50.4% of the total sales.
Average inventory level for PVs in November was in the range of 35-40 days, which is the same as October. FADA has thanked OEMs for reducing inventory levels and bringing it closer to the targeted 21 days. FADA expects that the target can be achieved in the coming months by further reducing wholesale billing. High inventory levels create financial burden for dealers, adversely affecting their working capital and profits.
FADA says that even though the situation is now better in comparison to earlier months, it is yet to reach normal levels. Banks and other lenders are still following a cautious approach when it comes to providing vehicle loans to retail customers. This comes at a time when even the government has recommended lenders to push retail credit growth to optimal levels.
FADA’s near term projection remains cautious on account of fluctuating consumer sentiments and forthcoming transition to BS-VI. FADA said that it will work with all stakeholders to ensure seamless transition to BS-VI. The organization will provide the necessary help to all members, so that potential of financial losses can be eliminated.
FADA is hopeful that car sales will register positive growth in December also, as it will be a month when OEMs and dealers will announce attractive offers for customers. Government’s consistent efforts to improve the economy can also help boost sales in December. If it can be achieved, the automobile industry shall be able to end the year on a positive note.