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7.9 Lakh Vehicles Worth Rs79,000 Crore Making Auto Dealers Sweat This Festive Season
Moneylife Digital Team 31 October 2024
Economy & Nation
Amidst the festive cheers, auto-dealers are staring at a massive inventory of 790,000 vehicles worth Rs79,000 crore. At the same time, passenger vehicle (PV or car)-makers have cut production by over 18% to 873,288 units between April and September 2024. 
 
In September (the latest data), auto-dealers reported that the performance was largely stagnant despite festivals such as Ganesh Chaturthi and Onam.
 
During September, PV retail sales in India witnessed a steep fall of 18.81% year-on-year (y-o-y), signalling an alarming trend of declining consumer demand and deteriorating market sentiment, the Federation of Automobile Dealers Associations (FADA) says. "Seasonal factors such as shraddh and pitrapaksha, coupled with heavy rainfall and a sluggish economy, have exacerbated the situation, leaving dealers with historically high inventory levels of 80 days to 85 days—equivalent to 7.9 lakh vehicles worth Rs79,000 crore as of 30 September 2024."
 
"With rising inquiries and optimistic dealer sentiments, the outlook leans towards optimism, but high stakes and dependency on October's performance warrant a cautious approach. If the anticipated sales do not materialise, it could shift the outlook to pessimistic, putting dealers and OEMs in a difficult position heading into the new year," says CS Vigneshwar, president of FADA. 
 
Given the critical festive season around the corner, FADA urged original equipment manufacturers (OEMs) to take immediate corrective measures to avoid a financial setback. It also requested the Reserve Bank of India (RBI) to issue an advisory to banks, mandating stricter channel funding policies based only on dealer consent and actual collateral to prevent dealers from facing additional financial pressure due to unsold stock. "This is the final opportunity for PV OEMs to recalibrate and support market recovery before it is too late."
 
"While the festive season presents an opportunity for recovery, the high stakes in October make it crucial for dealers and OEMs to clear existing inventory. Strategic inventory management and targeted festive promotions are key to capitalising on the expected surge in demand and stabilising market conditions," the auto-dealers' apex body says.
 
Meanwhile, data from the Society of Indian Automobile Manufacturers (SIAM) shows that car-makers have reduced production by 18.07% during the first six months of FY24-25 due to falling sales. Between April and September 2024, domestic car sales fell 18.5% to 660,098 units from 810,221 units, while exports declined 5.1% to 205,091 units from 215,514 units in the same period a year ago. SIAM data does not include information from BMW, Mercedes, JLR and Volvo. 
 
Consequently, car-makers cut down production by 18.07% during the first half of FY24-25 to 873,288 units from 1.03mn (million) units recorded in April to September 2023, data from SIAM shows. 
 
 
Last month, FADA had warned dealers to act swiftly to stop taking on additional stock to protect their financial health. "OEMs, too, must recalibrate their supply strategies without delay, or the industry faces a potential crisis from this inventory overload. If this aggressive push of excess stock continues unchecked, the auto retail ecosystem could face severe disruption."
 
"If sales do not pick up during the festive period, then heavy discounts and offers might impact the profitability of dealers across the country," the auto-dealers' apex body says.
Comments
svrsama2015
5 months ago
This has implications for insurance industry (non-life). Its growth projections will need to be recalibrated because insurance companies' growth is related to sale of new autos. Renewal premium universe is limited both in terms of size and value.
Reply
iaminprabhu
5 months ago
It's BETTER for our ROADS that these vehicles are never bought & don't reach the streets!

Climate Change, Fossil fuels, GHG emissions, Streets clogged with vehicles and trampling PEDESTRIAN Rights to walking needs more attention on war footing!

Development Index which shows more cars sold is a SKEWED DISASTAROUS for our Planet!
Reply
financekid
5 months ago
In most cities there's traffic jam / congestion and no parking facility at most places of visit, this leads to hiring autos and cabs, so passenger vehicles are not added by most middle class.
Reply
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