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Last Updated : Aug 19, 2019 04:04 PM IST | Source: Moneycontrol.com

Auto sector tracker: Despite production cuts, stock inventory remains high with dealers

As per FADA the current inventory days have remained unchanged at 60-65 for two-wheelers and 55-60 days for commercial vehicles (CV) compared to June

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Despite makers of two-wheelers and commercial vehicles keeping their plants shut, or cutting production, inventory days with the dealers remain high.

As per details shared by the Federation of Automobile Dealers Association, (FADA) the current inventory days have remained unchanged at 60-65 for two-wheelers and 55-60 days for commercial vehicles (CV) compared to June.

This is twice the inventory days when the demand is stable.

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Hero MotoCorp, the country's largest two-wheeler maker, kept its factories shut for four days during the Independence Day weekend. Honda, TVS Motor Company and Bajaj Auto have reduced production over the last several weeks.

The stagnant levels of inventory with two-wheelers and commercial vehicles highlights the poor levels of retail off-take at dealerships. High cost of product acquisition and tight finance options has led to a squeeze on retail growth of automobiles.

"Two-wheeler inventory sees very slight reduction and continues to be at very high levels. The high levels of inventory has continued from the start of this current slowdown in September 2018 without respite in any month and is a very serious concern of our members and threatening the financial viability of many dealer members and therefore a cause of serious worry to FADA," it said a statement.

Retail sales have been low despite high discounts and consumer offers offered by manufacturers and dealers. From free registration of the vehicle to free music system to lower cost of annual maintenance contract, the two-wheeler industry is desperately trying to put sales back on track.

Two-wheeler retails were down five percent in July to 1.33 million units as against 1.40 million units sold in the same month last year. As per data shared by the Society of Indian Automobile Manufacturers (SIAM) two-wheeler sales to dealers by manufacturers slumped 17 percent in July to 1.51 million units.

As for the CV segment, retail volumes slipped 14 percent in July to 23,118 units as compared to 26,815 units sold in the same month last year. Wholesales to dealers however witnessed an even bigger fall at 27 percent to 56,866 units during July.

"CV inventory continues to remain at high levels and unlike the slight uptick in sales seen in July for PV and 2W, CV sales continued to be negative and gave little room to the dealers to reduce inventory," stated FADA.

Tata Motors, India’s largest CV maker, shut its truck making plant at Jamshedpur for the third time following sharp decline in retail demand. Rival Ashok Leyland also shut down its Pantnagar-based factory to regulate inventory.

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First Published on Aug 19, 2019 04:04 pm
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