Despite festive jump in sales, car dealers grapple with inventory worth Rs 75,000 crore

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Despite witnessing a surge in passenger vehicle (PV) registrations in October, auto dealerships across the country are stocked with an inventory of around 7,50,000 units worth Rs 75,000 crore according to a senior official from the Federation of Automobile Dealers Associations (FADA). The official also claimed that vehicle stock levels continue to remain for 75-80 days at various outlets.

C.S. Vigneshwar, president, FADA, said that enhanced vehicle availability and strong market interest, especially for SUVs and newer products, contributed to yearly growth in retail sales, but despite the strong numbers, inventory levels have declined by only five days' stock.

“PV OEMs (original equipment manufacturers) continue to heavily stock dealers, resulting in an overall inventory still at a high of 75–80 days. This may thus lead the season of substantial discounts to continue until the end of the calendar year,” Vigneshwar told Moneycontrol.

The FADA chief claimed that the majority of unsold vehicles at dealership stockyards are hatchbacks and sedans and only a small proportion of them are SUVs.

His comments come against the backdrop of higher retail offtake at dealerships. Around 4,50,000 units of PVs were sold by dealers during October, witnessing a year-on-year growth of nearly 34 percent from 3,36,382 units in the same month last year, as per Vahan data.

As per the auto retail body, potential challenges such as inventory overstock and economic headwinds may affect sales momentum during November and December this year. FADA highlighted the need for “strategic inventory management” and ongoing caution as the sector navigates these factors.

“PV OEMs need to slow despatches (to dealers). Deliveries have to come down on a month-on month basis. Only then will this lead to lower inventory,” said Vigneshwar.

Top carmakers ramp down despatches

Amidst declining wholesale figures, most carmakers claimed that they are working on cutting down inventory levels. For instance, the country’s largest carmaker Maruti Suzuki stated that it has recalibrated its wholesales in order to match retail figures.

"We are trying to ensure inventories are at a reasonable level, and there is no mismatch. Therefore, we are looking to bring down the inventory levels to 30 days by the end of November," Maruti Suzuki Chairman R.C. Bhargava recently told reporters. According to him, the company will produce cars only at a level that dealers can sell and monitor retail sales data closely to gauge demand.

Similarly, Hyundai Motor India Limited (HMIL), which has witnessed an over 30 percent increase in registration during this festive season over last year, has managed to reduce inventory levels to 30 days.

“We always work with four weeks of physical inventory with dealers. Before the festival season, some plus or minus would happen,” HMIL COO Tarun Garg told reporters ahead of the company's listing.

Tata Motors also aims to contain its high inventory levels through increased sales during the third quarter (October-December 2024) of this financial year. “The passenger vehicle market saw a 5 percent drop in Q2FY25 registrations, adding to inventory challenges across dealerships," stated Shailesh Chandra, managing director at Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility. He added, "In response, we slowed our supplies to maintain manageable stock levels. Demand in Q3 has shown signs of revival thanks to a robust festive season."

Mahindra and Mahindra (M&M), which continues to buck the trend, stated that its stock levels are the lowest among its peers. “We had a very good festival offtake, and our inventories now are way below 30 days at the dealers. So, our offtakes were much higher than the billing. We had a few extra days of stock which has been cleared," Rajesh Jejurikar, CEO and ED, M&M Auto Division, told reporters during second-quarter post-earnings call.