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Why auto shares are decling in Festive season 2024

Currently festive season is going on dashera gone and diwali is staring still why auto shares are day by day decling lets find out the and discuss in this article.

The festive season in India brings a blend of optimism and apprehension, especially within the auto industry. Traditionally, this time of year sparks hopes for increased sales, yet concerns about a potential dip in consumer spending loom large.

  • High Expectations Meet Caution: The festive period, particularly Diwali, typically sees a spike in sales across various sectors. Automakers usually ramp up their inventories in anticipation of this demand surge, driven by pent-up consumer interest and new model launches. However, early indicators suggest that these optimistic projections may not fully come to fruition.
  • Muted Initial Sales: Despite ample inventory and expectations of a festive boost, initial sales figures have been lackluster. This has raised alarms among automakers and industry analysts alike. As we approach the critical Navratri and Diwali weeks, it remains to be seen whether sales will pick up.
  • Consumer Spending Slowdown: A key factor affecting festive demand is the slowdown in consumer spending. Rising living costs, particularly food inflation, have diminished the purchasing power of the middle class, leading to increased caution in spending. This trend is evident in declining sales across various sectors, including automobiles, FMCG, and quick-service restaurants.
  • Concerns for Diwali Sales: Experts warn that Diwali sales, typically a major driver of festive demand, may fall short of expectations. Although purchases usually surge during this time, the current economic climate and consumer sentiment suggest a more tempered outlook.
  • Inventory Issues: Auto dealers are grappling with historically high inventory levels, averaging 80 to 85 days, equivalent to around 790,000 vehicles worth ₹79,000 crore. Such excess stock raises concerns that sales are not keeping pace with production. If Diwali sales disappoint, automakers could face a significant surplus, leading to further price cuts and diminished profitability.
  • Automaker Responses: In light of rising inventory and sluggish sales, major automakers have adopted various strategies, including substantial discounts on popular models. Yet, these measures have yet to yield significant sales improvements. For instance, Bajaj Auto is projecting festive sales growth of only 3% to 5%, well below the industry estimate of 8%.

The coming weeks will be pivotal for gauging the true state of festive season demand. While there are hopes for a sales surge during Navratri and Diwali, current trends indicate that overall demand may be more subdued than originally anticipated. The auto industry’s performance, often viewed as a barometer of consumer sentiment, will offer critical insights into the broader economic landscape in the months ahead.

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