FADA expects demand revival by mid to end-June

Retail sales of cars and SUVs dipped two percent in April to 2.42 lakh units, according to the data from the Federation of Automobile Dealers Association (FADA).

Ashish Harsharaj Kale, the president of FADA, said the inventory levels for all category of vehicles is higher than normal.

"For the passenger vehicles, the inventory is between 40-45 days and that for two-wheelers and commercial vehicles is between 45-50 days, while a normal healthy inventory level is of 30 days in a market," Kale said on Thursday.

According to Kale, "The high dealership closures is a worry and discussions are on with regards to how the industry can come out of this situation. The closures have mainly been seen in metro and tier-I cities where the growth and profitability have not been as expected. So the viability of dealership became difficult when volumes did not grow. The cost structures of dealerships have become such that it became tough to maintain profitability due to lack of growth".

“Basically the dealership closures have been in passenger vehicle segment and across the board,” he said.

Talking about the demand outlook, Kale said, "Expect demand to come back by mid-June to end-June if the above positive triggers fall in place. Customer inquiry level and overall interest in automobiles are strong but the purchase decisions are pending right now".