Home Business High passenger vehicle stockpile rings alarm bells amid festive sales

High passenger vehicle stockpile rings alarm bells amid festive sales


Indian carmakers are grappling with an unusual challenge this festive season: While they achieved record-high wholesale dispatches of passenger vehicles (PVs) in October, showrooms are now dealing with unprecedented inventory levels, raising concerns for both dealerships and manufacturers.

With inventories averaging between 63 and 66 days, the Federation of Automobile Dealers Associations (Fada) has urged manufacturers to resolve the issue promptly. On Monday, Fada urged them to moderate vehicle dispatches and introduce attractive schemes to incentivize car sales.

“This dual approach is essential to help dealers clear their inventory before year-end, averting the potential financial repercussions associated with excess unsold stock,” Fada said in a statement.

According to Fada, the Navratri period saw a surge in bookings driven by the introduction of new models, particularly SUVs, and attractive consumer offers. Vehicle registrations during Navratri, as a result, soared 18%, an all-time high surpassing the highs previously recorded in 2017. However, the impact of local elections and market saturation meant that the festive spirit didn’t translate uniformly into sales across all regions, it said. Passenger vehicle registrations spiked 6.5% in the 10-day Navratri period (from 15-24 October) year-on-year to 140,000 units, data released by Fada showed.

Registrations in October at 354,000 units were up 6.5% from September, but down 1.36% from a year earlier. However, it may be noted that unlike last year, this October had a 15-day period at the beginning considered inauspicious for big-ticket purchases.

“The PV segment is navigating through a tricky phase. Festive days might spike bookings, yet the shadow of year-end discounts looms over immediate sales. High inventory levels in PVs, at a critical 63-66 days range, demand urgent attention from OEMs. Without substantial interventions and if Diwali sales don’t rise to the occasion, the weight of unsold stock could lead to significant dealer distress, echoing Fada’s concerns for potential industry-wide repercussions. Immediate and decisive action is imperative to counter the risk of a financial squeeze as the year closes,” said Manish Raj Singhania, president of Fada.

The recent surge in wholesale passenger vehicle dispatches, growing by 16% in October to 390,000 units compared to the previous year, may seem like a positive sign. However, industry executives cautioned against interpreting this growth as the sole reflection of demand.

“Now, the stock level is high at 335,000 units, roughly equivalent to 30 days of sales. The first 15 days of November are auspicious, especially for the northern and central parts of the country, and November will depend on how the first 15 days of retail have happened. If retail sales are a little lower than expected, then we might see an impact on the wholesale number going forward from November because the stock is quite high,” said Shashank Srivastava, senior executive director of Maruti Suzuki India Ltd.

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Updated: 06 Nov 2023, 11:35 PM IST

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