Piling Inventory Levels Set To Cause Pain To Auto Dealers, Says FADA President

The FADA revealed that auto dealerships across the country recorded a peak inventory of more than 700,000 units coming up to Rs 73,000 crore due to a slowdown in sales

The executive also called on PV Original Equipment Manufacturers (OEMs) to keep an eye on potential dealer failures in the aftermath of these inventory levels. (Image source: Tata Motors)

Source : Tata Motors

A decline in passenger vehicle (PV) sales has caused a major headache for auto dealers. The Federation of Automobile Dealers Association (FADA) revealed that auto dealerships across the country recorded a peak inventory of more than 700,000 units coming up to Rs 73,000 crore due to a slowdown in sales. 

The association claimed that the inventory has been piling up from 65-67 days early last month to 70-75 days now, reported Moneycontrol. Manish Raj Singhania, President, FADA, said that these high levels of stock pose a major risk to sustainability for dealers. He urged that the issue needs to be dealt with urgency and caution.

The executive also called on PV Original Equipment Manufacturers (OEMs) to keep an eye on potential dealer failures in the aftermath of these inventory levels.

“Carmakers should realign their production around the retail figures. To achieve that, they should reduce their vehicle supplies to dealers. While the reduction cannot happen in a single month, the gap between (PV) retail and wholesale figures should be around 50,000 to 70,000 units,” Singhania noted.

The executive stated that the average number of days of vehicle stock for dealerships should be 30 days. He suggested that carmakers cut down their dispatches in the coming months, but increase them during the end of September or early part of October in the year.

“If carmakers are genuinely interested, they need to keep the dealers healthy. So they should bring out adequate schemes so that we are able to bring these vehicles to the market,” Singhania said.

Notably, the passenger vehicle sales in the country climbed by 1 per cent to touch 3,20,120 units last month, data from the association revealed. During the same period, passenger vehicle wholesales decreased by 2.5 per cent on a year-on-year (YoY) basis to 3.41 lakh units. This decline was attributed to the high base effect of the previous year.