Vinod Aggarwal, president of the Society of Indian Automobile Manufacturers (SIAM)He acknowledged the current high inventory levels, but sees it as a short-term phenomenon. He notes that the passenger car segment saw 3% year-over-year growth in the first quarter, even on a high base, indicating some underlying strength in the market. However, a slight 2.5% drop in passenger car sales in July suggests that some market correction has begun.
However, Aggarwal remains optimistic, stressing that the fundamental factors supporting the industry, such as a strong economy and favourable monsoons, remain intact. He anticipates a pick-up in demand when the festive season begins, particularly with festivals such as Ganesh Chaturthi and Onam around the corner.
Despite Aggarwal’s confidence, the large volume of unsold inventory, amounting to about 7.3 lakh vehicles, with an estimated value of ₹70,000 crore—poses a significant challenge. Dealers are concerned about the financial pressure of maintaining such high inventory levels, especially as they prepare for the arrival of new models during the festive season. The rise in inventory from 62 days in July to 72 days in August underlines the scale of the problem, and dealers are now faced with the dual pressure of managing this stock while also ensuring they can meet retail demand.
Arun Malhotra, former Nissan CEO, said the industry’s growth projections may have been too ambitious, with many automakers expecting a 10-15% increase in sales, while actual demand growth was forecast at just 4-5%. This mismatch between supply and demand has led to a backlog of unsold vehicles at dealerships.
Read also: Maruti Suzuki says subdued demand is no cause for concern
With the festive season approaching, Malhotra predicts that discounts and promotional schemes will increase significantly as automakers look to clear their stocks. While this may temporarily boost sales during the festive period, Malhotra warns of a possible repeat of the current situation once the festive season ends, with inventory levels remaining high and production having to be adjusted accordingly.
For consumers, the current situation presents an opportunity to avail huge discounts and wide availability of models. With almost all car variants available and waiting times drastically reduced, buyers can expect attractive offers in the coming months. Maruti Suzuki, Hyundai, MG Motor, Mahindra and Tata Motors are offering substantial discounts on select models, with some even going as far as ₹5.5 lakh in slow moving variants.
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