A large section of two-wheeler dealers has asked manufacturers to put a complete stop to monthly despatches by cutting down production, as inventory levels have soared to around 60 days due to the continuing weak retail sales.
Normal inventory available should be of around 15 days and ideally not cross 30 days, the dealers concerned told FE. They said the bulk of the inventory is of entry-level motorcycles, apart from scooters, where sales have slowed down with consumer preference moving to electric variants.
Industry sources said 75% of the monthly two-wheeler sales are of entry-level models, which has seen distress for over a year now due to high ownership costs. Since Hero MotoCorp is the leader in the entry-level segment of bikes, the company’s inventory position is the highest with some of the dealers, almost touching 90+ days.
Email queries sent to Hero MotoCorp, Bajaj Auto, TVS Motor Company, and Honda Motorcycle and Scooter India, asking what their respective inventory levels with dealers are and whether the latter have urged them to stop despatches, did not elicit any response till the time of going to the press.
Though the Federation of Automobile Dealers Associations (Fada), in its sales data for May, said the two-wheeler inventory is at 23-25 days, industry sources pointed out that Fada only captures inventory position from the main dealerships and not their secondary channels, so there is a mismatch.
A bulk of such dealers said manufacturers keep on projecting growth potential in the coming days by comparing sales with a year ago, which is a faulty process, as the previous year saw repeated Covid-related shutdowns.
Two-wheeler sales are still down compared with the 2019 levels, a pre-pandemic year. According to May retail sales released by Fada, two-wheeler sales fell by 14% against the same month in 2019. In fact, despatches by manufacturers have also been less than the 2019 levels. For instance, in May all the three manufacturers – Hero MotoCorp, Bajaj Auto and TVS Motor — reported a decline in despatches against the same month in 2019. Hero MotoCorp’s despatches dropped by 28.46%, while Bajaj Auto’s fell by 53.28%. Despatches by TVS Motor declined by 19.14%. This is why, the dealers say, a complete stoppage of despatches is required.
Some manufacturers have projected sales would pick up during the upcoming wedding season. However, dealers pointed out that 60% of the wedding season is already over.
One such dealer told FE that stopping despatches would also be beneficial for manufacturers as their receivables against them are rising. Normally, dealers take vehicles from manufacturers on a cash-and-carry basis, but with the pandemic breaking out and demand slowing, the same has moved on to credit.
The issue of high inventory of two-wheelers was raised by Fada president Vinkesh Gulati in a LinkedIn post in January. “The inventory at the dealers’ end are once again at alarming levels and all of us need to talk to our OEMs so that the same can be controlled. Fada through its monthly press release is already highlighting this issue to the entire auto industry community and especially to our two-wheeler principals. Apart from this, we as a fraternity also need to discuss with banks and OEMs to launch easy finance schemes so that we are in a position to revive the demand,” he wrote.
