Carmakers will take corrective action to cut inventory levels at their dealers: SIAM

FADA had recently stated that high stock levels of 6 lakh units have resulted in financial stress at the dealerships (Image Credit: Pixabay)

In the wake of auto dealers urging carmakers to reduce vehicle dispatches, Society of Indian Automobile Manufacturers (SIAM) has affirmed that “corrective actions” will be taken by carmakers to reduce inventory levels at their dealers. A SIAM official maintained that the automobile manufacturers will keep a “good equilibrium” between demand and supply of their models to optimise the stock levels.

Federation Of Automobile Dealers Associations (FADA) had recently stated that high stock levels of 6 lakh units have resulted in financial stress at the dealerships. The auto retail body stated that PV inventories have reached levels of 65-67 days of sales.

“It is the individual companies' decision on how they handle their working capital. At the end of the day, it is in the interest of all the OEMs to make sure that their dealers are (financially) healthy and do good business. At the association level, we believe that all OEMs will take responsible actions if dealers are struggling with excessive inventory,” said Vinod Aggarwal, President, SIAM, while giving an overview of Auto industry volumes during Q1 FY2024-25.

According to the data released by SIAM, total PVs sold during April-June period were 10,26,000 units, up by three percent from 9,96,565 units in Q1 FY24.

When queried on dealers seeking better inventory management from OEMs, Aggarwal maintained that such fluctuations keep happening and the industry body does not see it as a concern.

"We should not worry too much about the stocks because I am sure all the respective companies, where the stock level is high, will take corrective action," Aggarwal said.  He added, “It is not like that the stock levels will be high at all the companies as some, in anticipation of higher sales, might have sold more units to their respective dealers.”

To a query related to the Uttar Pradesh government announcing 100 percent waiver of registration fees on hybrid vehicles and its impact on EV sales, he stated that two different views were emerging at the OEM level and therefore "SIAM would not like to comment" on the issue.

When quizzed about the declining electric car sales, Aggarwal said one should not make very strong statements like "revival" or "gone into recession" because it would be too small a period to judge their performance. In his view, the acquisition cost of EVs is still high than traditional vehicles.

"Yes, the numbers are little bit less than the expectation. But at the same time, we should also look at the ground realities. The interim (subsidy) scheme by the government of India is for a very short duration. We are now expecting that the government will come out with some new policy on (providing) incentives in the upcoming budget. Based on that, this industry will start picking up," averred Aggarwal.

Meanwhile, the auto industry has sought sops to promote electric vehicles (EVs) and suggested that the government should bring in additional incentives for scrapping of vehicles in the upcoming Budget. The auto industry body emphasised on a growth oriented Budget with focus on greater allocation for capital expenditure.

"We are expecting that the government should come up with a FAME 3-like policy, and good schemes like PLI are already in place, which we are sure will continue," stated Aggarwal.

"In addition, we are also expecting the government to do something more on the incentives for the scrapping of vehicles, because the scrappage policy is already in place but we have not seen much impact of that.”