Auto Industry Crisis: The Indian auto industry is facing a major challenge as the stock of vehicles with dealers is increasing and sales are sluggish. According to the Federation of Automobile Dealers Association, the stock of unsold cars at dealerships across India has crossed 7 lakh units, worth about Rs 73,000 crore. Despite the upcoming festive season, the industry is witnessing a slowdown in demand, leading to a pile of unsold vehicles.
According to the federation’s report, there has been a significant increase in the inventory of passenger vehicles at dealerships. It has now increased from 65-67 days in early July 2024 to around 70-75 days. This situation is posing a great risk to the dealers, as the level of unsold stock is constantly increasing. Several factors have been attributed to the slowdown in sales, including the impact of the Lok Sabha elections, bad weather conditions and unprecedented rains.
The excess inventory has put a heavy burden on dealerships. The federation estimates that dealers currently have about 7,30,000 unsold vehicles, which is equivalent to about two months of sales. However, the Society of Indian Automobile Manufacturers estimates the figure to be around 4,00,000 units. The upcoming festive season, starting later this month, is expected to bring some relief to dealerships, but until then, dealers will need support in the form of credit facilities, while vehicle manufacturers may need to reduce production to handle inventory management.
Maruti Suzuki cuts production
Maruti Suzuki India Ltd, the country’s largest automaker, has announced production cuts in response to a drop in sales. The company reported that sales were much lower than anticipated during the first few months of the current financial year, necessitating production cuts to balance inventory levels. In July 2024, Maruti Suzuki reported a 9.65 per cent year-on-year decline in sales, with most models in its portfolio showing negative growth. Although sales improved marginally on a month-on-month basis, the company’s SUV/MPV lineup, which includes models such as Ertiga, Brezza, Fronx, Vitara, Invicto and Jimny, saw a 10 per cent decline in demand during this period. Heavy discount schemes and incentives offered through Nexa and Arena showrooms also failed to boost sales.
