The double whammy of higher inventory costs and higher discounts is a nightmare for car dealers as it has a direct impact on their profit margins.
“With our inventory already at record levels, buyers are expecting even deeper discounts,” said Manish Raj Singhania, president of the Federation of Automobile Dealers Associations.
The comments came after sales of unsold cars In August, the world’s third-largest auto market recorded a record 70-75 day sales, valued at 778 billion rupees ($9.27 billion). Discounts are also at an all-time high.
Singhania expects inventory levels to come down in October, during the festive seasons of Navratri and Deepavali, when Indians typically make big purchases.
Many buyers have postponed their purchases until October, hoping to get bigger discounts, FADA noted, adding that heatwaves in the summer months and subsequent heavy rains in different parts of the country have affected visits to showrooms and delayed buying decisions. In fact, dealer car sales fell 4.5% in August, their third decline so far in the financial year that began in April. The fall in car purchases by retail buyers contrasts with a rebound in overall consumer spending, which hit a seven-quarter high in April-June.
Car sales are considered a key indicator of private consumption in the country. Automotive industry represents 7% of the country’s GDP, according to government data.
While newly launched models, particularly sport utility vehicles, continue to sell at a steady pace, dealers are unable to sell older models, including SUVs, Singhania said.
“Manufacturers should make efforts to reduce sales to dealers and not bill more than they sell at retail,” he said.
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