High Passenger Vehicle Inventory May Slow Down Sales In Rest Of 2023

The inventory is yet to come down after festive season as companies continue to dispatch more vehicles to dealerships.

<div class="paragraphs"><p>Cars at a dealership. (Source: Unsplash/Representational)</p></div>
Cars at a dealership. (Source: Unsplash/Representational)

The high stock of passenger vehicles at dealerships is likely to limit wholesale sales in the rest of the calendar year, as demand comes off the festive highs.

Despite sales of over 10 lakh units during the three-month festive season, the inventory is yet to come down as companies continue to dispatch more vehicles to dealerships.

"The current estimated stock in industry is around 3.23 lakh units, which translates to about 30 days of inventory," Shashank Srivastava, senior executive officer of marketing and sales at Maruti Suzuki India Ltd., told BQ Prime.

Dealers prefer to maintain lower inventory towards the end of the year as buyers tend to defer vehicle purchases to get the latest model.

The 30-day inventory is higher than the usual stock of three weeks across dealerships. Automakers had shipped 3.90 lakh vehicles to car dealers in October in anticipation of robust sales during the festive season.

Earlier this month, the apex body for auto retail, the Federation of Automobile Dealers Associations had asked carmakers to reduce vehicle dispatches and launch attractive schemes to clear out the all-time high inventory in the channel.

The auto retail body said that this is crucial to avoid the potential financial repercussions of excess unsold stock before year-end.

"The vehicle dispatches by automakers to dealerships need to fall to around 3.25 lakh units in November for the inventory to come down. Otherwise, the industry will be in a mess," Manish Raj Singhania, president at FADA, said.

According to dealers that BQ Prime spoke with, car sales were stronger in north India in the 15 days leading up to Bhai Dooj in November, while the slowdown in entry-level cars had a more severe impact in the southern and western markets.

The slowdown in smaller cars may prompt carmakers to reduce production for some models in November, something that has not happened since the Covid-19 period, Nomura said in a report last month.

FADA Raises Red Flag As Passenger Vehicle Inventory Soars To All-Time High