Passenger Vehicle Inventory Reaches Record High in India

The Indian automobile sector is facing significant challenges due to a sharp year-on-year (YoY) dip in sales and a resulting inventory pileup. Inspite of the festive season around, sales is not increasing, we will try to gauge the market sentiments . 

In August 2024, the inventory of unsold vehicles was already high at 70-75 days, with about 780,000 vehicles worth Rs 77,800 crore remaining unsold. Since then, the situation has worsened due to slowing consumer demand and growing economic uncertainties, making it harder for dealers to sell their stock.
 
By October 2024, the passenger vehicle inventory reached a record high of 80-85 days, totaling around 790,000 unsold vehicles valued at nearly Rs 79,000 crore. This has created a major challenge for dealers, who are now burdened with excess stock and financial pressure.

 
The Federation of Automobile Dealers Associations abbreviated as (FADA) has raised concerns about the high inventory levels of passenger vehicles in India, which have now reached a record of 80-85 days. This has led to financial strain for automobile dealers, who are grappling with increased cash flow challenges due to the excess inventory.
 
Typically, dealers prefer to keep inventories for around 30-35 days. The current situation intensified by high-interest rates and market fluctuations, is putting immense pressure on their working capital and causing financial stress. FADA has urged automakers to take corrective measures to avoid further difficulties for dealers, such as providing financial support or reducing the production of new units to balance demand and supply.
 
This piling inventory not only reflects poor market demand but also heightens financial risks for automobile dealerships, increasing their capital holding costs and cash flow challenges. FADA has expressed concerns and urged automakers to adjust production to mitigate the impact on dealers, many of whom are now facing liquidity issues due to the growing mismatch between supply and demand.
 
This issue arises amid declining sales in the face of economic uncertainties, which has resulted in slower vehicle movement, making it harder for dealers to clear their stocks.
 
The FADA has raised concerns about the ongoing financial pressure on dealers due to high inventory levels and significant discounts offered by Original Equipment Manufacturers (OEMs). With sales not picking up as anticipated during the festive season, these heavy discounts are likely to adversely affect dealer profitability. 

To help mitigate the risks faced by automobile dealers amid these challenges FADA has urged the Reserve Bank of India (RBI) to establish strict guidelines on funding.
 
This call for action comes as the industry continues to grapple with rising inventory levels, which have reached alarming heights, and the need for effective strategies to ensure sustainable profitability for dealerships. Could pollution be a factor for which people are curtailing themselves from making a purchase? With this thought we sign off for now: