Car cos find roads to dealers choked: PV sales decline for the first time in 2.5 years in July amid sluggish demand

New Delhi: Passenger vehicle sales fell for the first time in two and a half years in July amid sluggish demand and high dealer inventory, reflecting a broader slowdown in consumer spending across sectors after a two-year post-pandemic boom. While industry body Society of Indian Automobile Manufacturers (SIAM) will issue official sales data only later this month, industry estimates accessed by ET show 344,000-345,900 vehicles were sold in the local market last month, a decline of about 2.5% from 353,000-354,000 units sold in July 2023. Dealer stocks are at about 407,000 vehicles.

Passenger vehicle sales last fell in February 2022. At the time, sales declined by 1.8% to 302,965 units.

Automakers in India mostly report wholesale dispatches from factories to dealerships and not retail sales.

“There is slowness in bookings and enquiries on ground. Companies have built up stocks ahead of the festive season which starts with Onam in Kerala. There will be some variance between growth in wholesale and retail volumes because of inventory already present in the channel. While wholesale may not be as good, retail sales are expected to pick up,” a senior industry executive said on condition of anonymity.

A second executive said much will depend on how the festive season performs in Kerala. “Kerala will be a harbinger of what we can expect during the festive season this year. If sales take off and inventory gets liquidated, wholesales will move. Or else, dealers may be hesitant to take on more stocks. So far, vehicle sales in Kerala have been faring well due to inflow of remittances and better natural rubber prices,” he said.

The festive season, considered auspicious for buying big ticket items such as gold, cars and home appliances, starts with Onam in Kerala on August 17. The first phase of the festive period this year is spread over four weeks, ending on September 16. Festive sales in Kerala during August and September contribute 9% of annual automobile retail sales.

“Usually, the spike in festive sales moves from Kerala to Maharashtra, and then to northern parts of the country. But this year, Raksha Bandhan (August 19), Janmashtami (August 26) and Ganesh Chaturthi (September 7) is coinciding with the Chingam month. There is no backlog in the industry. Retail sales in this period are expected to be good. This will help liquidate stocks, which may in turn help better dispatches in the coming months,” the first executive said.

In July, leading carmakers from Maruti Suzuki to Hyundai Motor India and Tata Motors posted a decline in wholesales. While sales at Maruti fell 9.6% from a year earlier to 137,463 units, rival Hyundai reported a 3.3% drop at 49,013 units. Sales at Tata Motors fell 6% to 44,725 units.

Toyota Kirloskar Motor (TKM) and Mahindra & Mahindra (M&M) bucked the trend to register 44% (29,533 units) and 15% (41,623 units) growth in sales, respectively. The companies saw volumes grow on back of demand for utility vehicles like Toyota Innova Hycross and Mahindra XUV700. JSW MG Motor India too grew sales by 35% to 4,572 units on a low base.