FADA: Five-Consecutive Months of Declining Stock Markets Affect Vehicle Sales

Automobile manufacturers said on March 6 that consumer confidence has taken a backseat due to the incessant decline in equity markets during the past five consecutive months. The market downturn has led to more SIP closures and muted discretionary spending due to lower profitability.

During February the automotive market declined by 7% on a YoY basis. Two-wheelers (2W), three-wheelers (3W) and passenger vehicle (PV) sales declined by 6%, 2% and 10% respectively.

PY retail sales dipped to 3,03,398 units in February against 3,38,390 units in the year-ago period. Similarly, 2W sales were down to 13,53,280 units last month, compared with 14,44,674 units in February 2024.

3W sales came down at 94,181 units, compared with 96,020 units in February last year, while CV sales were reduced to 82,763 units during the month, against 90,551 units in the corresponding month last year.

C S Vigneshwar, President, FADA, said, “During the month, dealers began expressing concerns about inventory being pushed to them without their consent. While such initiatives may serve broader business objectives, it is critical to align wholesale (dispatches to dealers) allocations with genuine demand to protect dealer viability and ensure healthy inventory management.”

Dealers also noted about weak market sentiment which continues to loom around the entry-level segments, along with delayed conversions and challenging targets. They highlighted that original equipment manufacturers (OEMs) should refrain from overburdening dealers with excessive inventory.

“This feedback underscores the need for greater alignment between national strategies and local dealer insights. Inventory levels in this segment remained in the range of 50-52 days,” Vigneshwar said.

In the 2W segment, urban areas reported a sharper decline of 7.38% compared to a 5.5% decline in rural markets. Rural performance was better on account of better agricultural sentiments and seasonal marriage demand.

“Dealers attributed this to inventory imbalances, aggressive pricing adjustments (notably post-OBD-2B), weak consumer sentiment, lower enquiry volumes and limited finance availability. Concerns over slow-moving models and external economic pressures, such as liquidity constraints and inflation, further intensified these challenges,” the FADA President said.

CV segment has taken a hit on the back of weakening sales in the transportation sector and tightening finance norms, he added.

Overall sales in February declined to 18,99,196 units against 20,46,328 units in the year-ago period.

There is an opinion brewing around people, stating that the market will improve in March as dealers recalibrate their targets to better align with current demand, FADA said.

Vigneshwar said, “The convergence of multiple festivals—ranging from Holi and Gudi Padwa to the onset of Navratri—and year-end depreciation benefits is expected to provide a much-needed boost to vehicle purchases.”