Indian auto dealers struggling with record-high unsold inventory, worth $9.27B
India's automobile dealers are facing a challenging situation due to an unprecedented rise in unsold car inventory and increasing consumer demand for discounts. In August, the amount of time taken by the country's auto dealers to sell their unsold cars reached a record high of 70-75 days. The total value of this unsold stock is estimated at a staggering $9.27 billion (over ₹900 crore).
Buyers seeking more discounts
The Federation of Automobile Dealers Associations (FADA) has expressed concerns over this trend, which is impacting their profitability. "With our inventory already at record levels, buyers are expecting even higher discounts," said Manish Raj Singhania, President of FADA. While the discounts are at an all-time high, as per the reports, the situation has been exacerbated by consumers' anticipation of even deeper discounts during the upcoming festive season, further straining dealers' profit margins.
Dealers hope for inventory reduction during festive season
Dealers are hopeful that the upcoming festive season of Navratri and Diwali will help reduce inventory levels. Many consumers have postponed their purchases until October in anticipation of higher discounts. However, adverse weather conditions such as summer heatwaves and heavy rains have negatively impacted showroom visits and delayed purchase decisions across various regions in India.
Dealership car sales witness 3rd drop this fiscal year
Despite an overall increase in consumer spending, retail car purchases have seen a decline. Dealerships reported a 4.5% drop in car sales in August, marking the third decrease since the start of this fiscal year (FY) in April. This trend is particularly concerning as auto sales are often viewed as a significant indicator of private consumption within India. According to government data, India's auto industry constitutes 7% of the country's GDP.
New models continue to sell despite challenges
Despite the current challenges, newly launched models, especially sport utility vehicles (SUVs), are maintaining steady sales. However, dealers are struggling to sell older models including SUVs. Singhania urged manufacturers to "reduce sales to dealers and not bill more than what is retailing," in an effort to alleviate the pressure on dealerships amid these market conditions.
