Off the road, there's a Rs 52,000-crore pileup while car sales hit the brakes
Healthy inventory, say carmakers
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Mumbai: Car dealerships across India are staring at unsold inventory worth a record Rs 51,000-52,000 crore-the highest ever in value terms-as manufacturers continue to push vehicles into the market despite subdued retail demand for over a year.While the 34-38 days of stock (440,000 units) by volume up to May is still marginally lower than the peak of the 40-45-day pileup ahead of Diwali last year, the total value has hit a high due to the increase in ticket size and a build up over time, according to industry executives.The Federation of Automobile Dealers Associations (FADA) pegs the inventory level even higher-at 52-53 days-raising concerns about rising working capital stress among dealerships and the disconnect between wholesale dispatches and retail offtake.This translates to a marginal year-on-year growth—marking the slowest pace of growth in eight months and the lowest monthly volume recorded so far this calendar year. Retail sales lagged behind wholesale dispatches. A total of 302,214 cars were retailed in the same month, a decline of 3.14% over the same period last year.Underscoring the persistent slowdown in movement of stock at dealerships, cars have been stuck in yards for over 50 days for almost 14 months now, against the norm of 21 days, said Vigneshwar.Most dealers that ET spoke to cited rising inventory as a serious concern. Hyundai and Maruti executives, however, said inventory levels in their channels are healthy. Hyundai Motor India is 'maintaining a healthy inventory level of four weeks' across its dealership network in line with industry norms, said Tarun Garg, its chief operating officer, adding that this was similar to that in the same period last year.Partho Banerjee, head of sales and marketing at Maruti Suzuki India , said the numbers were an improvement over the year ago. 'Our inventory levels are much better than the previous year,' he said during a monthly sales call on June 2. 'It's to the tune of 35 days.'Some models, though, are bucking the trend and have waiting lists. These include variants of Maruti's compact SUV Brezza and people mover Ertiga, as well as Mahindra's Thar, Thar Roxx and Scorpio-N, according to Nomura. Select variants and colours of Toyota Hyryder and Hycross are also on a wait list of four to six weeks, and eight to 10 weeks, respectively.Hyundai's Garg acknowledged that the demand environment in the domestic market continues to be challenging. 'However, we remain optimistic in our strong fundamentals, which enables us to strategically pursue opportunities that can drive both growth and profitability,' he said.Garg expects the recent interest rate cuts by the central bank and income tax relief to support demand sentiment. 'We remain cautiously optimistic in the backdrop of global trade and economic uncertainties,' said Garg. He sees the recent rate reductions, which should lower car loan rates as well, spurring demand. 'Further, the CRR (cash reserve ratio) cut will reduce the inventory cost for our dealers.'Analysts said measures such as the rate cut and reduced income tax levels will start showing results only in the second half of the financial year.'We expect factors such as lower income taxes and reduced interest rates to support demand, though the improved demand might be evident only by H2 of CY25F,' Kapil Singh of Nomura Global Markets Research said in a note.One potential risk is the impact on production from June due to China's curbs on the export of rare earth magnets, he wrote. Crucial for electric vehicles, magnets are also used in fossil fuel-based cars, as well as the broader industry.Nomura is maintaining its 5% year-on-year passenger vehicle industry growth forecast for FY26.
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