Passenger vehicle sales in India rose 10 percent in July | Photo: Shutterstock
According to the Federation of Automobile Dealers Associations (Fada), passenger vehicle sales have plummeted, resulting in an unprecedented inventory of over 700,000 units worth Rs 73 billion at dealerships across the country. Stocks have increased from 65-67 days in early July to 70-75 days, raising concerns over the sustainability of dealerships.
The car dealers’ body, according to a Money control The report notes that vehicle bookings have shot up from 65-67 days in early July to 70-75 days now.
“This poses a substantial risk to the sustainability of distributors, so extreme caution is required. I urge PV OEMs to be vigilant against potential distributor failures due to these high inventory levels,” said Fada President Manish Raj Singhania.
He added: “Automakers should realign their production based on retail sales figures. To do so, they should reduce their supplies of vehicles to dealers. While the reduction cannot happen in a single month, the gap between retail and wholesale sales (PV) figures should be around 50,000 to 70,000 units.”
“The average number of days of vehicle inventory for auto dealers should be 30 days, with a surplus of about a week,” Singhania said. “While automakers may reduce their shipments in the coming months, they may increase them by late September or early October this year.”
Photovoltaic sales rose 10 percent in July, says Fada
Notably, passenger vehicle sales in India rose 10 per cent in July to 3,20,129 units, according to Fada data. However, wholesale sales of PV vehicles in July witnessed a year-on-year decline of 2.5 per cent to 3.41 lakh units, largely due to the high base effect of the previous year.
“If automakers are really concerned, they should ensure the welfare of dealers. They should introduce proper schemes to enable us to bring these vehicles to the market. Also, they should support us with the additional interest that is generated by holding excess stocks for extended periods. If they absorb this additional interest cost, it will not erode our margins,” Singhania added.
‘Fluctuations continue to occur’
On the issue of stock-outs, the Society of Indian Automobile Manufacturers (SIAM) has said that the industry body does not consider it a problem. “These fluctuations keep happening,” said Vinod Aggarwal, president of SIAM.
Each company must decide how to manage its working capital. “Ultimately, it is in the interest of all OEMs to ensure that their distributors are financially healthy and doing good business. At the association level, we believe that all OEMs will take responsible action if distributors have issues with excessive inventory,” Aggarwal said.
Meanwhile, talking to Money controlPuneet Gupta, Head of S&P Global Mobility, said: “Automakers, in anticipation of higher sales, have ramped up production, leading to increased dealer inventories. However, it is time to readjust expectations as pent-up demand has subsided and current uncertainties are dampening consumer interest. Also, rising interest rates are increasingly weighing down potential buyers, further straining demand.”
First published: August 21, 2024 | 16:46 IS
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