(Bloomberg) -- Strong festival season demand boosted sales of automobiles last month, offering some relief from the broad-based consumption slump this year.
October retail sales of cars and motorcycles surged 32% and 36% on year, data from Federation of Automobile Dealers Associations, or FADA, showed Wednesday. New launches in the months leading to the Hindu festival of Diwali, coupled with discounts, lured buyers, FADA said.
The festival season is crucial for four- and two-wheeler makers, as it makes for as much as 30-35% of annual sales, according to the industry body.
While the robust sales have reduced the number of days for the unsold inventory, the decline is not much. Automobile dealerships are now sitting on 75-80 days of inventories, compared with 80-85 days in September, the data show.
Wedding Season
The upcoming wedding season starting November will be a litmus test of whether the momentum can sustain. The Confederation of Indian Traders estimates around 4.8 million nuptials, and FADA is hopeful this will underpin demand for cars and two-wheelers.
This should help offset the seasonal slowdown toward the end of the calendar, as many prospective vehicle buyers defer purchases to the new year to get a better resale value whenever they decide to upgrade.
The rural and urban markets showed divergent trends during the festive season. Demand for cars and bikes in rural markets was strong, thanks to a bumper harvest, while urban Indians cut back on their spending.
“Demand is holding up in rural areas and tier-2/3 cities, but urban metros and industrial demand are weak,” Economists Sonal Varma and Aurodeep Nandi wrote in a Nov. 5 note from Nomura Holdings Inc.
Overall, the festival consumption is mixed and a cyclical slowdown is underway, Nomura economists said, adding that their rough estimates suggest an increase of 15% over last year, compared to a jump of 32% in 2023 and 88% in 2022.
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