As the Indian Auto Industry continues to grapple with falling sales, dealer level inventory of unsold cars is at an all time high
Despite the upcoming festive season, Federation of Automobile Dealers Associations (FADA) has announced that passenger vehicle inventory has seen a significant increase at automobile dealerships across India. As per latest reports, this stockpile has reached over 7 lakh units, valued at around Rs 73,000 crores. This unprecedented stock levels have caused automakers in India to mull slowing down of production and Maruti Suzuki becomes the first to make such an announcement to scale back production.
Heavy Burden on Automobile Dealerships
A rising stockpile, due to slowing down of sales, poses a considerable risk to dealers which FADA states has gone up from 65-67 days in early July 2024 to around 70-75 days as on date. The slowdown in demand could be attributed to many factors. Slower demand was earlier initiated by the Lok Sabha elections while adverse weather conditions with extreme heat followed by unprecedented rainfall compounded the issue even further.
This slowdown across the passenger vehicle segment in India has placed a heavy burden on dealerships. As per Federation of Automobile Dealers Associations (FADA), dealers currently have approximately 730,000 unsold vehicles which is equal to around 2 months of sales. However, Society of Indian Automobile Manufacturers (SIAM) estimates that this figure is around 400,000 units.
The upcoming festive season that starts off later this month could see a rise in sales, thus bringing in some respite to dealerships. Till then, the dealers should be supported in terms of extended credit facilitates while automakers could scale down production and optimize sales networks for better inventory management.
Maruti Suzuki Announces Production Cuts to Balance Inventory
Maruti Suzuki India Limited has stated that a reduced number of cars will be produced from their facilities following a marked decline in sales. The car maker stated that sales during the first few months of this current financial year have been significantly lower as compared to what was manufactured and hence production has to be adjusted so as to balance these stocks.
Most automakers in India have reported lower sales. In July 2024, Maruti Suzuki India Limited, the largest automaker in the country showed off a 9.65% year-on-year decline in sales with most models in its portfolio showing off negative sales. However, sales did improve on a month-on-month basis, albeit marginally.
The company recorded lower sales across its portfolio particularly with its SUV/MPV lineup that included the likes of Ertiga, Brezza, Fronx, Vitara, Invicto and Jimny recording a 10% lower demand during the period. Hefty discount schemes and incentives offered both via Nexa and Arena showrooms, also did not help in stirring up sales. Taking into account the 4 month period of April to July 2024, despite an increase in production by 7.4% to 4,96,000 units during the said period, Maruti Suzuki sales improved by just 1.2% to 4,27,000 units.
