Car Inventory Surges To All-Time High As Retail Sales Slump Nearly 20%

Dealerships are saddled with all-time high inventory as carmakers continue to pile on dispatches ahead of the crucial festive season, despite a sales slowdown.

As many as 7.9 lakh cars worth Rs 79,000 crore are languishing at dealerships—that's equivalent to unsold stock of 80-85 days, according to data released by the Federation of Automobile Dealers Associations on Monday. That, when retail car sales slumped nearly 20% to 2,75,681 units in September.

• ⁠Car sales down 18.81% YoY at 2,75,681 units

• ⁠2W sales down 8.51% YoY at 12,04,259 units

• ⁠3W sales up 0.66% YoY at 1,06,524 units

• ⁠CV sales down 10.45% YoY at 74,324 units

According to estimates and wholesale figures released on Oct. 1, Indian carmakers shipped 3.55-3.60 lakh units to dealerships in September. That's a gap of more than 80,000 units between wholesales and retails in one month alone.

“Despite the onset of festivals such as Ganesh Chaturthi and Onam, dealers have reported that the performance has been largely stagnant,” FADA President CS Vigneshwar said in the statement. “This suggests that overall market sentiment during these festive periods has been underwhelming, with a trend leaning towards flat or negative growth.”

The Shraadh period (considered an inauspicious time to buy vehicles) further impacted sales negatively, leading to a year-on-year decline in retail sales across various categories. Discounts and offers have been introduced across segments to stimulate demand, but these have yet to translate into a significant improvement in sales.”

Risk-Reward

Retail sales in October 2024 can see a boost as both Dussehra and Diwali are in the same month, but record-high car inventory is a risk for both original equipment manufacturers and dealerships if demand doesn't meet expectations, FADA said. Heavy discounts and offers to clear the backlog can also impact dealer profitability. 

“While the festive season presents an opportunity for recovery, the high stakes in October make it crucial for dealers and OEMs to clear existing inventory,” FADA said in the release. “Strategic inventory management and targeted festive promotions are key to capitalising on the expected surge in demand and stabilising market conditions.”

Recalibration

To be sure, carmakers are recalibrating dispatches to match demand.

In September, India's three largest carmakers—Maruti Suzuki India Ltd., Hyundai Motor India Ltd. and Tata Motors Ltd.—shipped up to 10% fewer units to dealerships. India's largest carmaker, Maruti Suzuki, said its inventory levels have declined from 36 days as on 31 August 2024 to one month as on 31 September.

“[We] can't compare (September sales) with last year due to the Shraadh period,” Partho Banerjee, head of sales and marketing at Maruti Suzuki, said during a sales call on Oct. 1. The company, according to him, is focusing more on VAHAN data now to assess the demand on the ground.

Still, FADA has now urged the automakers to take immediate corrective measures to avoid a financial setback. The dealer lobby has also called on the Reserve Bank of India to issue an advisory to banks, mandating stricter channel funding policy based only on dealer consent and on actual collateral.

“This is the final opportunity for carmakers to recalibrate and support market recovery, before it's too late,” Vigneshwar said in the statement.