Unsold Inventory of Passenger Vehicles Reaches Critical Levels Amid Dealer Concerns
Passenger vehicle (PV) manufacturers have been increasing their dispatches to dealerships on a month-to-month basis, despite earlier promises to scale back supplies. This has led to a mounting crisis for car dealerships across the country, with unsold inventory of passenger vehicles hitting alarmingly high levels. According to the Federation of Automobile Dealers Associations (FADA), stock days at PV showrooms have now stretched to between 70-75 days, highlighting a major concern for the automotive industry.
In its latest report, FADA revealed that the unsold inventory of passenger vehicles currently totals 7.8 lakh units, which are collectively valued at an astonishing ₹77,800 crore. This situation has raised alarm bells within the industry, as unsold inventory continues to pile up at an unsustainable rate. Despite ongoing concerns, FADA claims that PV manufacturers have continued to increase dispatches to dealers on a regular basis, exacerbating the issue instead of resolving it.
FADA President Manish Raj Singhania expressed deep concern about the deteriorating market conditions. He noted that passenger vehicle sales have seen a decline of 3.46% month-on-month (MoM) and 4.53% year-on-year (YoY) in August, despite the onset of the festive season. Traditionally, this period marks a peak in vehicle sales, driven by heightened consumer demand and purchasing. However, this year, demand has been notably weak, with factors such as delayed customer purchases, poor consumer sentiment, and persistent heavy rains negatively affecting sales across the board.
“The inventory situation has become alarming, with stock days stretching to 70-75 days and unsold vehicles now totaling 7.8 lakh units, worth ₹77,800 crore,” Singhania said. He emphasized the urgency of the matter and urged both dealers and manufacturers to take immediate corrective measures to prevent the issue from escalating further.
Dealers and Manufacturers Urged to Address Rising Unsold Inventory of Passenger Vehicles
As the unsold inventory of passenger vehicles continues to climb, FADA is raising SOS signals, warning dealers that immediate action is needed to safeguard their financial health. According to the association, car dealerships must act swiftly by halting the intake of additional stock. Failure to do so could result in significant financial strain, given the high value of the unsold vehicles currently sitting in showrooms.
FADA also called on original equipment manufacturers (OEMs) to reassess and recalibrate their supply strategies in light of the ongoing market challenges. Without swift and decisive action from both sides, FADA warned that the industry could face a potential crisis resulting from this unprecedented inventory overload.
The situation has been building for several months, with FADA previously warning in July that inventory levels had surged to between 67-72 days. At the time, unsold stock totaled 7.3 lakh units, valued at ₹73,000 crore. While these figures were already considered troubling, the situation has only worsened since then, with manufacturers reportedly continuing to dispatch vehicles to dealerships at a higher rate.
Car manufacturers, however, have presented differing estimates of the inventory situation. Some major players in the automotive industry have pegged the unsold inventory figures at much lower levels. For example, Partho Banerjee, senior executive director of marketing and sales at Maruti Suzuki, one of India’s largest car manufacturers, noted that the company’s network stock stood at 38 days at the beginning of August and had subsequently decreased to 36 days. These discrepancies between FADA’s data and carmakers’ estimates have further complicated efforts to resolve the inventory issue.
Impact of Rising Unsold Inventory of Passenger Vehicles on the Indian Market
The unsold inventory of passenger vehicles is having a tangible impact on the overall automotive market in India. According to FADA’s report, retail sales of passenger vehicles in the country fell 4.53% year-on-year in August, with 309,053 units sold compared to 323,720 units in August 2023. The month-on-month decline was similarly concerning, with sales dropping by 3.46% from July 2024.
While the passenger vehicle segment has seen a drop in sales, other segments of the automotive market have shown more resilience. Sales of two-wheelers (2W) reached 13.38 lakh units in August, registering year-on-year growth of 6.28%. Similarly, three-wheeler (3W) sales grew by 1.63%, with 105,478 units sold. However, not all vehicle segments have been immune to the downturn in consumer sentiment. Tractor sales, which are closely tied to agricultural output and rural demand, fell sharply by 11.39%, with 65,478 units sold. Commercial vehicle (CV) sales also saw a decline, with a 6.05% drop in sales to 73,253 units.
FADA believes that the unsold inventory of passenger vehicles will continue to present challenges for the industry if corrective measures are not taken soon. Dealers are already facing significant pressure, with mounting stocks threatening their financial sustainability. The issue is further compounded by poor consumer sentiment, which has been affected by multiple factors, including rising inflation, stagnant income levels, and adverse weather conditions.
Looking ahead, FADA is calling for better coordination between dealers and manufacturers to prevent the situation from spiraling out of control. Both sides will need to adopt more agile and responsive strategies, especially in light of the ongoing global economic uncertainties. The unsold inventory of passenger vehicles, if left unchecked, could have long-lasting repercussions on the automotive sector, potentially leading to dealership closures and significant financial losses for all stakeholders involved.
In summary, the unsold inventory of passenger vehicles in India has reached a critical point, with dealerships struggling to manage the rising stock levels. FADA has called on manufacturers to recalibrate their supply strategies, while urging dealers to stop taking on additional stock. Immediate action is required to avert a potential crisis, as both the industry and consumers face significant challenges moving forward.
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