FADA urges banks to tighten funding to dealers as rains play spoilsport in August

• Auto sales in August 2024 recorded a month-on-month decline.
• One of the reasons for the decline in sales was excessive rainfall in the country.
• FADA has urged banks and NBFCs to tighten funding for dealers with excessive inventory.

Auto sales in India experienced a significant decline in August 2024, primarily due to excessive rainfall during this monsoon season, according to a report by the Federation of Automobile Dealers Associations (FADA).

The report highlighted a 7.01% month-on-month (MoM) decline in overall retail auto sales, falling from 20.34 lakh units in July to 18.91 lakh units in August.

Despite this monthly decline in sales, the auto sector witnessed a modest 2.88% year-on-year (YoY) growth compared to August 2023.

"India saw 15.9% excess rainfall, with a significant surplus in key regions, disrupting auto retail performance," said a report by FADA.

Decline in sales

The report added that the two-wheeler (2W) segment, despite showing a 6.28% year-on-year growth, registered a 7.29% month-on-month decline. As per the report, market saturation and weather disruptions were the key factors behind the decline in two-wheeler sales.


In the passenger vehicle (PV) segment, there was a 4.53% YoY and 3.46% MoM decline, while the commercial vehicle (CV) segment recorded an 8.5% MoM and 6.05% YoY decline.

FADA noted that weak industrial demand and weather-related challenges were major contributors to the significant drop in commercial vehicle sales.

Inventory levels continue to be a challenge

FADA also highlighted growing inventory challenges in the PV segment, with stock days ranging between 70-75 days, representing approximately 7.8 lakh vehicles valued at ₹77,800 crore.

The report noted that these high inventory levels, combined with aggressive OEM dispatches have created cash flow pressures for dealers, impacting their profitability.

"Dealers under pressure due to aggressive OEM dispatches, with dealers facing cash flow challenges and reduced profitability" the report said.

FADA urges banks to tighten funding

To address this, FADA has urged banks and NBFCs to tighten funding for dealers with excessive inventory. Additionally, the report emphasized the need for dealers and OEMs to recalibrate their supply strategies to avoid a potential inventory crisis.

For the upcoming months, the report paints an optimistic picture with the festive season offering growth opportunities. However, it also noted that the auto retail market must navigate challenges posed by weather uncertainties and inventory management.

With inputs from ANI.

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