The festive season in the market is believed to kick off with Rakshabandhan. Automakers also plan various attractive offers and discounts on their vehicles. However, despite the upcoming festive season, the Federation of Automobile Dealers Associations (FADA) has announced a significant increase in passenger car inventory at dealerships across India.
7 Lakh Cars Worth ₹73,000 Crore at Dealerships:
Recent reports indicate that stock levels are continuously increasing at dealerships across the country. The inventory figure has surpassed 700,000 units, worth approximately ₹73,000 crore. These cars are parked in dealership stockyards. This figure is roughly equivalent to two months' total vehicle sales. As stock levels rise, some car companies have also slowed down their production.
Rapid Decline in Car Sales:
In July, the passenger car market in India, the world's third-largest auto market, saw a decline in sales for the first time in two years. Due to the inability to sell cars, dealership inventories have surged, forcing car manufacturers to reduce dispatches (counted as sales). Sales during July fell by 2.5% year-on-year, with 341,000 units sold across the country.
Source: aajtak
The rising inventory due to falling sales poses a significant risk for dealers, which FADA notes has increased from 65-67 days at the beginning of July 2024 to around 70-75 days today. According to FADA, dealers currently have approximately 730,000 unsold vehicles, equivalent to about two months of sales. However, the Society of Indian Automobile Manufacturers (SIAM) estimates this figure to be around 400,000 units. Vehicle manufacturers can reduce production and enhance sales networks for better inventory management in the meantime.
Why Has Vehicle Sales Declined:
There are several reasons behind the decline in vehicle demand. The slowdown began with this year's Lok Sabha elections, and extreme summer heat followed by heavy rains also impacted car sales. This slowdown in the passenger vehicle segment has put considerable pressure on dealerships. However, to combat this, automakers are slowing production and offering discounts.
Car Sales in July:
Excluding Mahindra, Toyota, and Kia, most car companies saw a decline in sales in July 2024. Maruti Suzuki's sales in July were nearly 9.65% lower than the previous year's July. Hyundai, Tata Motors, and Honda also reported declines. Tata Motors saw a significant drop in the sales of its electric vehicles.
The April-June quarter saw a 7% year-on-year decline in electric car sales. Tata Motors, a leader in the EV segment, reported a 21% drop in sales in July, with 5,027 electric cars sold in the domestic market compared to 6,329 units sold in July last year.
Maruti Suzuki Slows Production:
According to Business Standard, Maruti Suzuki India Limited, the country's largest car manufacturer, has slowed down car production due to falling sales. The carmaker stated that vehicle sales in the initial months of the current financial year were significantly lower from a production standpoint, necessitating production adjustments to balance inventory.
Discounts up to ₹12 Lakh on Cars:
Currently, most car companies are offering substantial discounts on their vehicles. Tata Motors is offering discounts worth lakhs of rupees on models like Safari, Harrier, and even Nexon. Hyundai is also offering discounts on models like Venue and Exter this month. Jeep India is offering a massive ₹12 lakh discount on its Grand Cherokee model, bringing its starting price down to ₹68.50 lakh from ₹80.50 lakh previously.
With the inventory burden on dealerships, it is likely that additional discounts will be offered to clear existing stock and capitalize on the festive season. Recently, new models such as Mahindra Thar Rox, Tata Curvv EV, and Citroen Basalt have entered the market. Tata Motors is also set to announce the prices of the petrol-diesel variant of Curvv next month.
