The historically high inventory levels are causing anxiety among manufacturers as well as dealerships
Indian automobile manufacturers are faced with a unique challenge this festive season. Showrooms are currently facing historically high inventory levels even though they achieved record-high wholesale deliveries of passenger vehicles (PVs) in October 2023. This is causing anxiety among manufacturers as well as dealerships, according to a report by Mint.
The Federation of Automobile Dealers Association (FADA) has asked manufacturers to address the problem immediately, with inventories currently averaging between 63-66 days.
FADA pleaded with them on 6 November to control the number of vehicles dispatched and to launch alluring programmes to encourage the sale of cars.
“This dual approach is essential to help dealers clear their inventory before year-end, averting the potential financial repercussions associated with excess unsold stock,” the Federation of Automobiles Dealers Association (FADA) said.
“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,” the association added.
Bookings increased over the Navratri season due to the release of new models, especially SUVs, and attractive customer incentives. As a result, car registrations during Navratri increased by 18 per cent, reaching an all-time high that exceeded prior records set in 2017.
However, it stated that not all regions saw a consistent increase in sales due to the impact of local elections and market saturation. According to FADA, during the 10-day Navratri weekend (October 15–24), the number of passenger car registrations increased 6.5 per cent year-on-year to 1,40,000 units.
With 3,54,000 registrations, October saw a 6.5 per cent increase from September but a 1.36 per cent decrease from the same month last year. It should be mentioned, nevertheless, that in contrast to previous year, there was a 15-day window at the start of October 2023 that was unfavourable for large 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," Manish Raj Singhania, president of FADA, told Mint.
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," he added.