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In 2018-19, when inventory days approached 70 days, it led to the closure of around 282 passenger vehicle dealerships.
Passenger vehicle (PV) wholesales in July slipped by 2.5 per cent as original equipment manufacturers (OEMs) recalibrated their dispatches to dealers in the wake of high unsold inventory at the retailers’ end.
PV sales were down 2.5 per cent in July to 341,510 units, while three-wheeler sales were up 5 per cent to 59,073 units, and two-wheeler sales increased by 12.5 per cent to 1,441,694 units. SIAM Director General Rajesh Menon pointed out that three-wheeler sales are close to the peak of 2018-19.
Vinod Aggarwal, President, SIAM, said, “Though the three-wheeler and two-wheeler segments are performing well, there has been some de-growth in passenger vehicles and commercial vehicles in July 2024 compared to July 2023.” He added, “The above-average rainfall coupled with the upcoming festive season is likely to again propel growth in the short term. In addition, enabling budget announcements that emphasize overall economic growth with fiscal support for infrastructure and the rural sector should augur well for the auto sector in the medium term.”
As such, analysts have forecast a flat 0.8 per cent growth for PV sales in FY25.
“After a strong 26.8 per cent year-on-year growth in FY23, we’ve observed a significant slowdown. Growth moderated to 8.7 per cent in FY24, with projections indicating a mere 0.8 per cent increase for FY25,” said Ravi Bhatia, President and Director, Jato Dynamics. “The April-July period shows a stark contrast in growth rates, dropping from 33.2 per cent in 2022 to 8 per cent in 2023, and further down to just 2 per cent in 2024,” Bhatia told Business Standard.
“As we move forward, automakers and dealers may need to adjust their strategies to navigate this cooler market environment, focusing on efficiency, innovation, and value propositions to maintain growth in an increasingly challenging landscape,” Bhatia added.
SIAM is set to discuss the alarming rise in PV inventory in its upcoming executive committee meeting. This follows concerns raised by the Federation of Automobile Dealers Association (Fada), which represents dealers, over the inventory pileup with dealers, now at historic highs post-pandemic.
Fada has been vocal about the financial strain that high inventory levels place on dealerships, citing the additional interest costs incurred due to extended holding periods. With inventory levels surging to a high of 67-72 days, equating to approximately Rs 73,000 crore worth of stock, the situation is raising alarms about the financial stability and sustainability of dealerships.
The current inventory situation reflects a significant increase from July 2023, when inventory levels were at 50-55 days, worth Rs 49,833 crore in stock. In July 2024, inventory levels were between 67-72 days, worth Rs 73,000 crore in stock.
In 2018-19, when inventory days approached 70 days, it led to the closure of around 282 passenger vehicle dealerships.
First Published: Aug 14 2024 | 12:55 PM IST
