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The Federation of Automobile Dealers Associations (FADA) has sounded the alarm about rising inventory levels in India's passenger vehicle (PV) market, warning of a potential crisis if not addressed promptly. Despite declining retail sales in August 2024, original equipment manufacturers (OEMs) continue to increase dispatches to dealerships, exacerbating the problem. FADA data shows a 4.53% year-on-year decline in PV retail sales, reaching 309,053 units in August, compared to 323,720 units in the same period last year. Month-on-month, sales also dropped by 3.46% from 320,129 units in July 2024.
The situation is further complicated by the fact that PV wholesales (despatches from OEMs to dealerships) increased to 350,000-355,000 units in August 2024, up from around 341,000 units in July. This signifies a continued influx of vehicles into dealerships, despite the slowdown in retail demand. FADA President Manish Raj Singhania expressed concern over the burgeoning inventory, noting that stock days have reached an alarming 70-75 days, with a total inventory of 780,000 vehicles valued at a staggering Rs 77,800 crore. This mounting inventory poses a significant financial burden on dealers.
FADA has urged banks and non-banking financial companies (NBFCs) to intervene and limit funding to dealers with excessive inventory. The organization also advised dealers to refrain from accepting additional stock to protect their financial health. Singhania emphasized the need for OEMs to recalibrate their supply strategies immediately to prevent a potential crisis. The continued aggressive push of excess stock, if unchecked, could severely disrupt the auto retail ecosystem. FADA's warning underscores the pressing need for a collaborative effort between OEMs, dealers, and financial institutions to address the growing inventory challenge and ensure the stability of India's automotive industry.
Source: Alarming inventory levels but PV OEMs continue to increase dispatches to dealers, says FADA