 "Car dealers may be staring at inventory stockpile exceeding 400,000 units")
Automobile manufacturers expect a record inventory of 400,000 vehicles valued at Rs 44,000 crore by the end of this month as demand in India drops following three years of vigorous sales, according to a report in the Economic Times (ET).
With car shipments to dealers surpassing demand, registrations of passenger vehicles, an indicator of retail sales, are projected to decline by 5 per cent in May compared to the same period last year.
Sources said the expected decrease is attributed to election-related uncertainties, the completion of the marriage season, and heat waves affecting various critical markets, especially the Delhi-NCR region.
4% increase in shipments
Carmakers are projected to end May with wholesale or factory shipments to dealers totalling 340,000-350,000 vehicles, marking a 4-4.5 per cent increase from a year earlier. The report said that planned shutdowns by certain companies would aid in regulating production volumes and inventory management.
The report quoted Hardeep Singh Brar, national sales head at Kia India, saying, "Pre-Covid-19 stocks for the industry used to be in the range of 45 days. This has dropped to 2-3 weeks after the pandemic. Industry stocks are high."
He further said, "Forecast for monsoons is good. Interest rates are expected to come down later in the year, with inflation under control. Given the high base for the entire year, sales growth is likely to be in low single digits."
The report quoted an industry executive saying that the domestic automotive sector is set to conclude the month with a network inventory of around 400,000 vehicles, representing the highest absolute level on record.
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"It even surpasses the months preceding the festive season when manufacturers bulk up stock," Brar said.
He said that a sequential decline of 10 per cent in car registrations across the industry in May can be expected, although the Korean automaker is expected to achieve growth supported by an updated product portfolio. "We have no plans to adjust our production or dispatches, nor are we considering any discounts. Our products are competitively priced," the report quoted Brar as saying.
The report quoted Vinkesh Gulati, chairman of research at the Federation of Automobile Dealers Associations, as saying that he expects the ongoing "sluggishness to continue in June" and "the festive season, which kicks in October, will be a trigger" for a revival in demand.
Gulati said that due to the elevated inventory levels, it is anticipated that discounts and consumer incentives in June will rise by 15-20 per cent, compared to May. Earlier this month, certain car manufacturers cautioned about decelerating sales and increasing inventory levels during investor calls.
Auto sales in April, 2024
Automobile retail sales grew 27 per cent in April to 2.2 million units compared to the year before as demand grew in all categories and fuel prices were stable, said a group representing auto dealers. As many as 1.74 million units were sold in April 2023.
In April 2024, two-wheeler (2W), three-wheeler (3W), passenger vehicle (PV), tractor and commercial vehicle (CV) sales grew by 33 per cent, 9 per cent, 16 per cent, 1 per cent, and 2 per cent, respectively.
Industry experts believe that despite the growth in April, election uncertainty is delaying customers' purchasing decisions.
Auto sales in March, 2024
In March, total auto sales jumped by 3.14 per cent at 2,127,177 units compared to 2,062,409 units last year. Three-wheelers and two-wheelers witnessed growth of 17.13 per cent and 5.44 per cent, respectively.
Auto sales in February, 2024
Data by the Society of Indian Automobile Manufacturers (Siam) showed that passenger vehicles in India recorded their highest-ever February domestic sales of 370,786 units this year, 10.8 per cent higher than 334,790 units in February last year.
Two-wheelers and three-wheelers also witnessed higher sales in February this year as compared to t3he last year.
As many as 90,707 CVs were sold in April 2024, compared to 88,663 units the same time last year. The segment grew 2 per cent Y-o-Y growth and declined 0.6 per cent month-on-month.