Auto retail sales drop 7% in February amid weak sentiment, inventory woes: FADA

Automobile retail sales in the country declined by 7% year-on-year in February amid weak consumer sentiment and inventory concerns, the Federation of Automobile Dealers Associations (FADA) said on Thursday.

All vehicle categories reported a drop in retail sales last month, with the passenger vehicle (PV) segment witnessing the steepest decline of 10.34%. The two-wheeler (2W) category contracted by 6.33%, while commercial vehicles (CV) and tractors saw a decline of 8.6% and 14.5%, respectively. The three-wheeler (3W) segment registered a marginal drop of 2%.

FADA President C S Vigneshwar said the broad-based downturn was anticipated, as the dealer body’s previous survey had indicated a "flat to de-growth" sentiment for the month.

"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 allocations with genuine demand to protect dealer viability and ensure healthy inventory management," he said.

In the two-wheeler segment, urban markets suffered a sharper decline of 7.38% compared to a 5.5% dip in rural areas due to better agricultural sentiment and marriage-season 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 chief said.

The PV segment, despite registering a 4% growth in the fiscal year so far, saw a sharp 10.34% decline in February retail sales. Dealers cited subdued entry-level demand, delayed conversions and challenging sales targets as one the reasons behind the decline.

They urged manufacturers to avoid overburdening dealers with excessive inventory, which stood at 50–52 days.

The CV segment also reported a sluggish performance with a YTD decline of 0.5% and an 8.6% YoY drop in February retail sales. Dealers pointed to weak sales in the transportation sector, tighter financing norms, and pricing pressures, particularly impacting bulk orders and institutional contracts. However, robust demand for tippers, driven by increased government spending, offered some relief.

“There is cautious optimism that the market will improve in March as dealers recalibrate their targets to better align with current demand,” Vigneshwar said.

The recent downturn in stock markets has weighed on consumer confidence and discretionary spending, the association noted.

Near-term outlook

However, multiple upcoming festivals, including Holi, Gudi Padwa, and Navratri, along with year-end depreciation benefits, are expected to boost demand across vehicle segments.

FADA expects improved traction in the two-wheeler space due to positive agricultural output, while the PV segment could benefit from attractive schemes, festival-driven preponed purchases, and fiscal year-end incentives.

“Overall, while mixed sentiments persist, an adaptive market strategy that leverages festive demand and favourable financial incentives is anticipated to drive a recovery in March,” it added.