Despite an assurance by carmakers to cut down dispatches, top dealer association body, Federation of Automobile Dealers Association (FADA), said that inventory levels at passenger vehicle (PV) showrooms remain at alarming levels, with stock days now stretching to 70-75 days and inventory totalling 7.8 lakh vehicles, valued at an alarming Rs 77,800 crore.
The Federation on Thursday alleged that rather than responding to the situation, PV manufacturers continue to increase dispatches to dealers on a month-to-month (MoM) basis, further exacerbating the issue.
“FADA is raising SOS signals as PV sales fell by 3.46% MoM and 4.53% YoY in August. Even with the arrival of the festive season, the market remains under significant strain due to delayed customer purchases, poor consumer sentiment and persistent heavy rains. Inventory levels have reached alarming levels, with stock days now stretching to 70-75 days and inventory totalling 7.8 lakh vehicles, valued at an alarming Rs.77,800 crore,” said FADA President, Manish Raj Singhania.
FADA said dealers must act swiftly to stop taking on additional stock to protect their financial health. OEMs, too, must recalibrate their supply strategies without delay, or the industry faces a potential crisis from this inventory overload, the association said.
At the end of July, FADA had said that inventory levels units had surged to 67-72 days, equating to 730,000 units or Rs 73,000 crores worth of stock. Carmakers, however, have pegged the number to be much lower at about 400,000 units.
Partho Banerjee, Senior Executive Director, Marketing & Sales of Maruti Suzuki on Sunday said that their network stock which at the beginning of August was 38 days has now come down to 36 days.
PV retail sales in India fell 4.53% year-on-year in August to 309,053 units, as compared to 323,720 units in August 2023. While the two-wheeler (2W) sales at 13.38 lakh units and three-wheeler (3W) sales at 105,478 managed to post growth at 6.28% and 1.63%, respectively, tractor sales at 65,478 units dropped by 11.39% and commercial vehicles (CV) sales at 73,253 units saw a 6.05% drop.
2W sales, which are on the rise due to improving rural sentiment, were impacted by excessive rains and flooding.
FADA said that as they approach the festive season, there are several challenges that could impact auto sales in the near term. India experienced 16% above-normal rainfall in August and this excessive rainfall poses a significant risk to crops nearing harvest, particularly those planted in late June with a 75 to 90 days maturity cycle.
Additionally, the Shraddh period in September, regarded as an inauspicious time for purchases, is expected to pause sales for some time. On the positive side, the upcoming festivals, such as Ganesh Chaturthi, Onam and Navratri, are expected to boost consumer sentiment, especially in urban areas.