F A D A releases July’19 Vehicle Registration Data

The Federation of Automobile Dealers Associations (FADA) today released the Monthly Vehicle Registration Data for the Month of July’19.

July-19 Retail Sales

Commenting on July’19 performance, F A D A President, Mr Ashish Harsharaj Kale said, “Consumer Sentiment and Overall Demand Continued to be quite weak across all segments and mostgeographies.The July sales continue to be in the Negative zone YoY.Although Some respite seen with growth in MoM numbers which was mainly due to Revival of the Monsoon bringing some Positivity and also June having the 2^ndLowest Volume Base this Calendar Year after February.With June being a completely dry and rain deficient month,Consumer Sentiment was at its lowest and with July rains covering up a lot of the deficit,some confidence in consumer demand led to pending purchase conclusion in July.Despite these Factors CV Sales Continued to be in the Negative even MoM.”

State wise Vehicle Registration Analysis can be found in Annexure 1.

Dealer Inventory

The continued steps taken by PV manufacturersin reducing wholesale billing as well as regulating production has further led to decrease in inventory in the month of July.The PV inventory is now very close to FADA’s 21 days inventory levels.

FADA is Very thankful to all PV OEMs for initiating necessary steps and helping Dealers in reducing inventory thus helping us manage Our profitability and viability in these challenging times.

CV inventory Continues to remain at High Levels and unlike the slight uptick in Sales seen in July for PV and 2W,CV Sales continued to be Negative in Double Digit YoY and MoM and gave little room to the Dealers to reduce Inventory.

FADA Would Urge Our OEM’s to help Regulate this Inventory at the Earliest by 
Regulating Wholesale Supplies.With the Current weakness in Demand Overall and Especially in the CV Space the Current Inventory is a Worry for the Dealers, especially looking at the Transition to BS6 now being just 6 months away.

We Look Forward to our members reaching our suggested and requested level of 21days in CV inventory by September End.

2W inventory, sees very slight reduction and continues to be at very high levels. The High Levels of Inventory in 2W Segment has Continued from the start of this Current Slowdown in September 2018 without respite in any month and is a very Serious concern of Our members and threatening the financial viability of many dealer members and therefore a Cause of Serious worry to FADA.

We would once again urge and request all our 2W OEM’s to help regulate this inventory to regular levels of 3 weeks and help our members avoidthe Perils associated with High Inventory.

Near Term Outlook

FADA would categorise the near-term outlook as “Cautiously Optimistic’’

Cautious as:

1. The Consumer Sentiment and Demand continues to be Quite Weak and purchase postponement continues.
2. The Overall Economic situation continues to be weak.
3. Transmission of Surplus Liquidity and Interest Rate Cutsstill not seen in Retail Lending.
4. Confusion in Consumer Mind with regards to EV and BS6 leading to Postponement.
5. Flood Situation is quite Severe in many states having large Auto Sales.

Optimistic as:

1. The revival of Monsoon with Average or above average Rainfall in most parts of the country
2. Surplus Liquidity in the system after a prolonged shortage of it, hopefully leading to Aggression in Retail Lending soon.
3. Subdued Fuel Prices unlike last Festive Season.
4. A very good meeting with Hon. Finance Minister and All Measures for Growth Revival Suggested and were Seriously Listened to:
   1. Partial or Temporary Reduction in GST to Spur Immediate Demand,
   2. an Attractive Scrappage Policy
   3. Continued Liquidity Availability and Building Confidence in Banking&NBFC Sector to Facilitate Aggressive Retail Lending along with transmission of the Rate Cuts are some Key Suggestions Given by the Industry and by FADA andare being Seriously Deliberated Within the Finance Ministry.

and most Importantly

• H’ble Prime Minister himself leading the Efforts for Growth and Demand Revival and A strong and positive statement by him for the Auto Industry,including putting to rest the confusion on Co-Existence of IC Engines and EV.

FADA isVery hopeful and Positive that the Government will Soon take MoreInitiatives Specifically for the Auto Sector as well asForReviving Overall Consumer Demand ofWhich Auto Retails would also be a beneficiary.

Liquidity

Onthe Liquidity front Mr Kale Commented, “Liquidity Currently seems to be surplus in the banking system and with the Strong Focus of the RBI and Finance Ministry,should Continue to be so.The Recent Rate Cut by the RBI is an indication of its Policy of Monetary Easing and is a Big Positive.The Need now is in Transmission of the Liquidity and Rate Cuts in Lending at Retail levels to Spur Growth, as Banks and NBFC’s still Continue to Tread with a Cautious Approach for Obvious reasons.”

Long Term Outlook

On the Long-TermOutlook,F A D A President commented, “With the H’blePrime Minister aiming for Our Nation to become a US$ 5Tn Economy by 2025, the Auto Industry and specially the Auto Retail Sector will play a more important role in times to come in Contributing Towards this Vision. This coupled with Automotive Mission Plan(AMP) 2026, the Auto Industry will contribute 12% to India’s GDP which is a rise of ~4% Contribution to National GDP from current levels as envisioned in AMP 2026.

With the Size of the Indian Auto Market currently at 26 million and projected to Grow 50%+ by 2026,Automobile Dealerships will Continue to Play theKey Role in Delivery of these Mobility Solutions irrespective of the Technology adopted,in a Complex and Diverse Country Like Ours.

With a Projected Increase in Dealership Outlets  in tune with the Growing Auto Industry from the current 25,000 Outlets to 30,000+ Outlets required for this Growth and from the current Direct Employment of 25 Million to 40 Million by 2025,Automobile Dealers Would continue to be a Thriving Business Community and Continue to play a key Role in Nation Building and Continue being One of the Biggest Employment Generators and Tax Contributors as an Industry’’.

Key Findings from our Online Members Survey

• On the Current Sentiments of the Industry
  • 65% Dealers rated it as Bad(56% in June’19)
  • 34% Dealers rated it as Neutral (39% in June’19)
• On the Liquidity Front
  • 38% Dealers rates it as Neutral(46% in June’19)
  • 55% Dealers rated it as Bad(46% in June’19)
• On the Current Inventory Front
  • Average inventory for PVs ranges from25 – 30days(30-35 days in June’19)
  • Average inventory for 2W ranges from60 – 65days(60-65 days in June’19)
  • Average inventory for CV ranges from55 – 60 days(55-60 days inJune’19)

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