Vehicle Registrations for August shows improvement due to ongoing festivities

The Federation of Automobile Dealers Associations (FADA) today released the Monthly Vehicle Registration Data for the Month of August’20.

Commenting on how August’20 performed, FADA President, Vinkesh Gulati said, “With the start of Festival Season and the Government’s continued effort to open up India, the month of August saw good numbers when compared to immediate previous months. August also saw an arrest in decline and pullback efforts on all fronts were visible, though on YoY, all categories except Tractors continued to fall, though at a slower pace.

Passenger Vehicles after 5 months saw decline reducing to single digit. Customers who were sitting on the fence, finally concluded their purchase during ongoing festivals of Janmashtami and Ganesh Chaturthi. Entry level Passenger Vehicles were in high demand as personal mobility is being preferred with current pandemic showing no signs of reduction.

Apart from Rural Market which was showing revival signs until now, Urban Centres for the first time showed initial signs of demand pullback. With the Government’s priority in spending towards rural development and agriculture, coupled with good monsoon and a healthy sowing season, Tractor, Small Commercial Vehicles and entry level Passenger Vehicles positively impacted August Sales.

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Overall demand is still not back to Pre-covid levels as Banks and NBFCs continue to have a cautious approach towards funding. Commercial Vehicles, especially M&HCV category is still suffering from higher lead times with financers and an increase in cost of acquisition leading to viability issues. A stricter CIBIL score is also affecting customer finance.

FADA once again requests the Government to announce demand boosting stimulus and awaits the announcement of reduction in GST for 2-wheelers. We also await the much required incentive based scrappage policy. Both these measures will act as demand drivers for 2-wheelers and specially Medium & Heavy Commercial Vehicles sales in India thus once again making Auto Industry, a lead indicator for India’s growth.”

Near Term Outlook

September brings with itself, the inauspicious 16 days Shraadh period. This coupled with 30 days of Adhik Maas (an extra month in the Hindu calendar that is inserted to keep the lunar and solar calendars aligned) is considered inauspicious in North, East and West India when no high value transactions take place.

The moratorium period from banks has ended on 31^st Aug. During this period, if NPA’s are not too high and recovery rate is even neutral to positive, Banks and NBFC’s may return with aggressive financing schemes for Auto Loans thus leading to a strong demand pullback.

While OEM’s are dispatching vehicles to Dealers with a purpose of stocking-up inventory for the upcoming festival season, retail sales are still at 70-75% levels despite the low base of last year. FADA advises extreme caution to all OEMs and our Dealer fraternity to avoid excessive Inventory build-up thus leading to unmanageable interest cost which could further result in dealership closures.

Chart showing Vehicle Registration Data for August’20 with YoY comparison can be found below:

All India Vehicle Registration Data for August’20

Source: FADA Research