Over 7L passenger vehicles worth ₹73,000cr unsold across India
What's the story
The Federation of Automobile Dealers Associations (FADA) has reported a significant increase in passenger vehicle (PV) inventory, at dealerships across India. The stockpile has now reached an unprecedented level of over seven lakh units, valued at approximately ₹73,000 crore. This surge in inventory is due to a slowdown in sales, and poses a substantial risk to dealer sustainability.
Duration increase
Inventory holding period extends to 75 days
The duration of vehicle stockpile at dealerships has also seen a significant increase. FADA reports that the inventory holding period has gone up from 65-67 days in early July to 70-75 days now. This extended duration further exacerbates the challenges faced by dealers, potentially leading to dealer failures due to high inventory levels.
Production realignment
FADA urges carmakers to adjust production
FADA President Manish Raj Singhania has called on PV OEMs (Original Equipment Manufacturers) to adjust their production in line with retail figures. He suggests that they should reduce vehicle supplies to dealers, although this cannot be achieved in a single month. Singhania recommends that the gap between retail and wholesale figures should be approximately 50,000 to 70,000 units.
Inventory proposal
30-day inventory period proposed for dealerships
Singhania believes that a 30-day inventory period, with a slight excess of about a week, would be ideal for auto dealerships. He also suggests that automakers could lower their dispatches in the coming months, and increase them around September-end or early October. This strategy could help manage the current high levels of inventory at dealerships across the country.
Sales performance
July sees mixed results for sales
Despite the overall slowdown, FADA data has shown that India's passenger vehicle sales saw a rise of 10% in July, reaching 3,20,129 units. However, PV wholesales for the same month experienced a de-growth of 2.5% on year at 3.41 lakh units, due to the high base effect of last year.
Support request
Call for support from carmakers
Singhania has called on carmakers to support dealers by introducing adequate schemes and bearing the excess interest cost for additional days of stock-keeping. He emphasized that if brands are genuinely interested, they need to keep the dealers healthy. This plea underscores the need for collaborative efforts between manufacturers and dealers, to navigate the current market challenges and ensure dealer sustainability.