New Delhi: Retail automobile sales in India fell sharply in October, as an increase in insurance premiums and high fuel prices in a slowing economy have roiled consumer sentiment. In October, vehicle registrations declined 17% from the preceding month, despite festivals such as Dussehra. About 1.15 million vehicles were registered until 29 October, showed data from Vahan, the vehicle registration website of the Union government.

Registrations plunged 35% in October from a year earlier. The figures are not strictly comparable, as the full-month data will be issued only later this week.

To be sure, sales of cars and sports utility vehicles, as well as of two-wheelers, have been hit more by the current economic scenario. Commercial vehicles have been notching up a favourable sales growth every month.

“In the last two months, the situation has changed for the worse, given that higher interest rates and insurance premium have increased the cost of ownership, while fuel prices have also raised operating costs for consumers," said Anil Sharma, associate director at MarketsandMarkets, a market research firm.

In most parts of northern, western and eastern India, where Dussehra or Durga Puja is a major festival, vehicle registrations slumped in October. Gujarat topped the chart with an 85% drop, followed by 37% in West Bengal, 23% in Uttar Pradesh and 22% in Haryana. Maharashtra saw a 13% fall, although new registrations rose 2.7% in Delhi.

The numbers are a setback to the auto industry, given that September was already a dull month, with sales falling during Shradh, an “inauspicious" period for big-ticket purchases. The drop in October does not spell good news for automobile sales for the remainder of this fiscal.

Dealers of two- and four-wheelers said the sudden increase in insurance premium and fuel prices has hit consumer sentiment. The woes were compounded, as demand in Kerala plunged after severe floods and the West Bengal government decided to ban the sale of motorcycles to those without a driving licence.

An Uttar Pradesh-based Hyundai dealer said that although the one-week lag between the sale of a vehicle and its registration could add to the final October sales tally, it would not make up for the loss; at best might be on a par with the figures for September.

“We took inventory expecting 50% more retail than September, which was a dull month, along with Shradh, but this year Dussehra was extremely disappointing," he said, requesting anonymity.

“Sales have really been subdued this year," said a Mahindra dealer in Rajasthan. “We have been asking companies to not push inventory if there is scant retail demand. Compared to October 2017, retail sales have fallen by 13-15%."

Two-wheeler sales have been hit the most by the rise in insurance premium, though the roads ministry has clarified that customers can opt for either a one-year or three-year third-party insurance cover. “The damage was done by then, as the wrong message had reached customers. The inquiries have been extremely low in October," said a dealer for Hero MotoCorp Ltd in Delhi.

According to a senior industry executive, passenger vehicle registration fell 10-15%, while for two-wheelers it dropped 20-25%. Such a dull start to festive sales was last seen in 2012-13. “For a (Honda) Activa, almost 2.5% of the total sales value is the insurance cost and if there is a sudden increase, then there will be an impact," he said. “Also, sales in West Bengal tanked, despite a stay order from the Calcutta high court, as the sales momentum was lost in the run-up to Durga Puja."

“In metros there is some kind of a saturation, while in Tier 2 and 3 cities, barring Maruti Suzuki, Mahindra and Hyundai, companies are not ready with infrastructure. Auto industry is cyclical and this might be an indication that complexities regarding sales will increase," said Sharma.

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