Car sales are scaling new records every day but passenger vehicle dealerships, especially in the mass-market product segment are concerned about inventory buildup affecting margins. Dealers and manufacturers seem to be at odds in terms of reading the current sales trend and its impact.
Manish Raj Singhania, President, FADA told Financial Express Online that “What is worrying for FADA is the inventory levels of passenger vehicle dealers, which is averaging around 50-55 days. Ideally, we advocate for 30 days of inventory. Dealers work on a very thin margin of 3-4 percent, and if we have an inventory of 50-55 days, it means almost 50 percent of the dealer margin will go towards managing bank interest and holding the cost of the vehicle. Working on the balance 50 percent of the margin will be tough for dealers. We hope to have the optimum inventory period of 30 days.”
| Company | Wholesale | Retail | Actual Inventory | Avg Monthly sales | Inventory turnaround |
| Maruti Suzuki India | 3,610,766 | 3,322,884 | 287,882 | 132,915 | 2.165911 |
| Hyundai Motor India | 1,261,938 | 1,162,636 | 99,302 | 46,505 | 2.135277 |
| Tata Motors | 1,182,538 | 1,081,171 | 101,367 | 43,247 | 2.343917 |
| Mahindra & Mahindra | 853,729 | 769,551 | 84,178 | 30,782 | 2.734647 |
| Kia India | 557,094 | 481,658 | 75,436 | 19,266 | 3.915434 |
| Total | 7,466,065 | 6,817,900 | 648,165 | 272,716 | 2.376703 |
Looking at the sales data (SIAM and Vahan) the overall passenger vehicle inventory across the five leading carmakers, who amongst themselves account for almost 80 percent of PV car sales in India, comes to around 648,165 units. Amongst the highest concerns that the industry is seeing is for Kia Motors India, where some of the dealers are seeing inventory levels of over 60 days. Hyundai Motor India and Maruti Suzuki India, have better ratios.
Shashank Srivastava, Senior Executive Officer (Marketing & Sales), Maruti Suzuki India refuted the claims. “The dealer PV inventory estimates for the industry based on Vaahan registration data & reported wholesale data is around 3 lakh units. This is equivalent to about 27 days of stock considering that the average monthly retail this year is about 3.45 lakh units.”
Maruti Suzuki India stated its dealer inventory at the beginning of March was about 125,000 units which is about 25 days of stock as our average monthly retail is about 145,000 units. “Of course, these are average figures and model-wise inventory can vary from near zero for waiting models to a maximum of 40 days for slow-selling models. The inventory of course varies from dealer to dealer and geographically as well. At Maruti Suzuki, we are acutely conscious of dealer profitability and we optimise the same by modulating the model-wise production. We consistently monitor and take feedback from dealers about the same,” Srivastava added.
Puneet Anand, Assistant VP & Group Head, Corporate Affairs, Hyundai Motor India said, “Inventory-wise we are very happy and our dealers have sizeable control, and as time progresses our retail and wholesales are working in tandem with each other. I don’t think there is any movement for us to worry about, but we are closely following the same. We follow an agile system and if there is a change in market dynamics requirements, obviously we will recondition our production. We will see that our dealers and customers continue to enjoy. Our focus is to give our products to the customers in the shortest period, that’s why we are continuously increasing production. As we recently announced, last month Creta saw the highest-ever wholesale of 50,276 units, so obviously this is to reduce the waiting period for our customers.”
Nalinikanth Gollagunta, CEO, Automotive Division, Mahindra and Mahindra too shared a similar view. “Our registration/Vahan MS has gone up from Q3 FY2024 10.9 percent to February 11.8 percent. On YTD basis the wholesale market share is at 10.9 percent and registration market share is 10.8 percent. The stock days continue to remain below our historical averages. Given the robust demand, there are no plans to cut on production.”
“At nearly 1 month, we have a healthy channel stock as per industry standards. All our newly launched vehicles have been received very well in their respective segments. As of February 2024, our sales were at 51,321 units, 19 percent higher than the same period last year. Furthermore, since the time we have linked our strong focus and culture on Vaahan, we ensure tight control on production and offtake to keep optimum inventory in our value chain,” said a Tata Motors spokesperson.
Gulati acknowledged the conscious steps taken by “few PV makers who have recalibrated their supplies.”
“But we want all OEMs to build only those vehicles which have demand with dealerships and not just dump stocks at dealerships. Vehicles which have less demand, and for vehicles which are slow- or medium-moving and whose stocks are already at dealerships should not be billed to dealerships. They should focus instead on models desired by the customers and have faster turnaround times that should be billed to dealerships. Effectively, creating a good turnaround time will eventually reduce the inventory levels at the dealerships and dealers would be in a much better position,” Gulati urged OEMs.
