Passenger vehicle inventory pileups with automobile dealers across the country have led to their declining fresh dispatches from Original Equipment Manufacturers (OEM), industry officials said. In February, the passenger vehicle inventory held by dealers was in the range of 50-52 days.
The Federation of Automobile Dealers Association (FADA) has urged OEMs to align their production with the industry inventory and offtake. They pointed out that OEMs are dumping their excess inventory onto dealerships, which then bear the inventory costs and risks linked to unmanageable stock levels, given the cyclical nature of the automobile industry.
Inventory pressure
“Passenger vehicle inventory continues to be high, and we have not yet to reach stability after inventories hit a record high last year. They are dispatching vehicles to dealerships without consent, which has led to an increase in the passenger vehicle inventory,” CS Vigneshwar, President, FADA, told businessline.
“Dealers have now started saying ‘no’ to excess units and ‘without consent’ dispatches, raising concerns with OEMs. Passenger vehicle retail sales declined by 10.34 per cent year-on-year in February. OEMs should avoid overburdening dealers with excessive inventories,” he said.
Passenger vehicle sales declined in February, due to dampened consumer confidence on the back of five consecutive months of decline in the stock markets, investors closing more SIPs and reduced discretionary spending.
Festival push
However, automobile dealers anticipate a rise in passenger vehicle sales in March, driven byfestivals such as Gudi Padwa, Holi, Navratri and year-end depreciation benefits.
businessline had earlier reported that due to weak retail demand for cars in February, OEMs are expected to increase discounts on their product offerings starting in March. On top of the discounts, automobile dealers are likely to offer additional benefits to the consumers to clear the accumulating passenger vehicle inventory.
“The discounts offered by OEMs will also impact automobile dealers’ margins. We will be cautiously watching the sales situation in March,” added CS Vigneshwar.
Automobile companies implemented price hikes of up to 3 per cent on passenger vehicles in January 2025. Discounts on vehicles will include cash discounts, exchange discounts and other incentives.
Market Outlook
“The dealer expectations in March indicate that nearly 45 per cent foresee growth, 40 per cent expect flat performance and 14 per cent anticipate de-growth. PV space is expected to gain traction, fuelled by attractive schemes, the impact of preponed festival sales and fiscal year-end advantages,” stated FADA.