‘Festive season to push auto sales but disproportionate billings may lead to stress for dealers’

Although festive season demand may provide some temporary relief to the auto industry in the next two-three months, the continued disproportionate wholesale billings by original equipment manufacturers could lead to increased stress for dealers if uptake is lower than expected, according to a report.

 In its latest report on the auto sector, India Ratings and Research (Ind-Ra) on Friday said retail sales are likely to continue to lag behind wholesale sales in September 2020 although the sector has reported a month-on-month rise in sales over May-August 2020 after the washout in April.

“After an above-average acreage backed by adequate monsoon, the prospects of a robust kharif harvest have original equipment manufacturers (OEMs) hoping for a retail demand revival from the rural side during the upcoming festive season,” the ratings agency said in a statement. It added that sales are likely to remain sluggish in September, especially on the retail side, “due to the inauspicious period of Shraadh”.

The retail demand also improved sequentially over April-August 2020, the sales volumes are still much lower than wholesales. But, passenger vehicle (PV) and two-wheeler (2W) retail sales volumes fell 7 per cent and 29 per cent year-on-year, respectively, in August 2020.Amid the increasing cases of COVID-19 and job losses across the sections of the society, consumer sentiment remains weak; the overall retail sales in August 2020 were only around 71 per cent of the August 2019 levels, it said.