Automakers and dealers have started to feel the pinch of the slowdown in demand for cars and sports utility vehicles (SUV), with inventory of around Rs 60,000 crore lying unsold with dealers.
The passenger vehicle (PV) industry is sitting at an all-time high inventory of 62-67 days. Despite improved product availability and substantial discounts to stimulate demand, market sentiment remains subdued, with extreme heat resulting in 15% fewer showroom walk-ins.
In anticipation of a pick-up in demand after the general elections aided by a favourable monsoon, passenger vehicle makers have been adding stock for several weeks. Dealer partners, however, have been asking them to curb supplies. The monsoon season generally sees reduced consumer offtake.
Manish Raj Singhania, president, Federation of Automobile Dealers Association (FADA), said, “The total unsold inventory in the market will be 600,000-650,000 units and their average ticket size should be Rs 9.5 lakh. The last two months itself saw stock get pushed up by 77,000.”
Total wholesale dispatches during June were around 341,000 units, a growth of 4%. Actual retails (vehicle registrations) during the same month, however, were 281,600 units, highlighting the gap between market demand and supplies by manufacturers.
“Banks have become reluctant to take risks and are willing to lend to only quality customers with good CIBIL scores. This is also playing spoilsport for demand generation. That is why discounts are hitting the roof,” said a Mumbai-based car dealer.
Discounts on cars have surged to multi-year highs with even newly launched models, including SUVs, sold at a bargain as both manufacturers and dealers get desperate to liquidate stocks.
Speaking to the media on June 1, Partho Banerjee, head of sales and marketing, Maruti Suzuki, said, “The increase (in June volumes) came from new model launches from the competition. Inventory is on the higher side.”
To tide over the poor walk-ins in showrooms, Maruti Suzuki dealers were asked to keep their dealerships open well past their usual closing time. In addition, all sales promotion events were conducted during the evening to beat the day-time rise in temperatures.
“Extended working hours were done only in the urban market and this initiative came in very late. They should have started that in May or early June to derive the benefit. And the initiative did not work looking at the sales volumes in June,” Singhania added.
Maruti Suzuki’s retail volumes dropped by 8% during June, higher than the drop witnessed by the industry during the same month. As per FADA data, which is sourced from the Centre-controlled VAHAN portal, the PV segment saw 7% year-on-year drop in sales volumes to 281,566 units.
“Our dealer feedback highlights challenges such as low customer inquiries and postponed purchase decisions. With the festive season still some time away, it is crucial for PV makers to exercise caution. Effective inventory management strategies are essential to mitigate financial strain from high interest costs,” FADA said in a note.
