While inventory levels are at among their highest levels, the auto industry is expecting sales of passenger vehicles (PVs) to improve in the upcoming festive season, coupled with average rainfall in many parts of the country, Society of Indian Automobile Manufacturers (SIAM) said on Wednesday.

The total PV wholesale (dispatches to dealers) in the domestic market declined 2.5 per cent year on year (YoY) in July to 3,41,510 units compared with 3,50,355 units in the corresponding month last year, SIAM’s monthly sales report indicated.

“Though three- and two-wheeler segments are performing well, there has been some de-growth of PVs and commercial vehicles in July 2024, compared to July 2023. The above-average rainfall coupled with upcoming festive season is likely to again propel growth in the short term,” Vinod Aggarwal, President, SIAM, said.

In addition, enabling Budget announcements, which emphasise on overall economic growth with fiscal support for infrastructure and rural sector, should augur well for the auto sector in the medium term, he added.

According to SIAM’s monthly report, the utility vehicles continued to drive sales of PVs, clocking 1,88,217 units in July (1,80,831 units), a year-on-year growth of 4.1 per cent. However, passenger cars recorded a drop of 12 per cent at 96,652 units (1,09,859 units). Sales of vans also declined by a percentage, SIAM said.

High inventory

According to industry observers, the industry is witnessing moderation in demand after high-paced growth witnessed in the past couple of years. Even though manufacturers undertook stock corrections in July to reduce inventory in the network, PV segment inventory surged to historic highs of 67-72 days amounting to ₹73,000-crore worth of stock. Such a situation is posing risks for dealer sustainability, said a Delhi-based dealer.

Last week, Federation of Automobile Dealers Associations (FADA) also said that higher inventory level poses a substantial risk for dealer sustainability, and urged PV manufacturers 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,” C S Vigneshwar, Vice-President, FADA, had said.

Overall growth

Meanwhile, SIAM said the total two-wheeler sales in the domestic market grew 12.5 per cent to 14,41,694 units during the month (12,82,054 units).

The scooter sales grew 29.2 per cent to 5,53,642 units (4,28,640 units), while motorcycle sales grew 4 per cent to 8,50,489 units (8,17,206 units).

Total three-wheeler sales grew 5 per cent to 59,073 units (56,204 units), SIAM said in the monthly sales report.

Overall, the sales across categories grew 9 per cent to 18,42,277 units (16,88,613 units).

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