High inventory to slow Passenger vehicle, 2-wheeler wholesales 

The ratings agency said, however, that the overall auto industry would continue to grow in the next few months, in line with improving economic indicators. 
For representational purposes. (File | PTI)
For representational purposes. (File | PTI)

CHENNAI: Passenger vehicle and two-wheeler wholesales will likely come down over the next few months as inventory levels remain high at the dealer level, according to India Ratings and Research (Ind-Ra). The ratings agency said, however, that the overall auto industry would continue to grow in the next few months, in line with improving economic indicators. 

But wholesale billings are expected to moderate in the next couple of months since inventory at dealer level for passenger vehicles (PVs) and two-wheelers is already at higher than the 21 days recommended by Federation of Automobile Dealers Association (FADA),

Over the past two-three months, original equipment manufacturers (OEMs) had been focusing on stocking-up at the dealership level ahead of the peak demand expected during the festive season in October-November. Production volumes for PVs and two-wheelers were up 32 per cent and 40 per cent (year-on-year), respectively, in October this year.

“However, the continued higher wholesale billings than retail registrations during August-October have led to a considerable inventory build-up at the dealership level, particularly for two-wheelers, with the retail sales lagging behind wholesales during this period,” Ind-Ra said. At October-end, average inventory for PVs at dealership level stood at 35-40 days as compared with 25-30 days in the same period last year. Similarly, the average inventory for two-wheelers at the dealer level at October-end remained high at 50-55 days as against 35-40 days last year. 

The high inventory has also been driven by poor retail sales, retail registrations of PVs falling 9 per cent (year-on-year) in October, while the year-on-year decline was much higher for two-wheelers (27%), commercial vehicles (30%), and three-wheelers (65%). It suggests that demand at the consumer level is yet to reach the pre-Covid levels despite the festive season tailwind, the ratings agency noted.

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