Car dealers may end up with ₹44,000 crore worth of inventory as demand cools off

Carmakers expect to face a record stockpile of 400,000 vehicles worth ₹44,000 crore by this month-end as demand cools in India after a 3-year run of scorching sales. With car despatches to dealers outpacing demand, passenger vehicle registrations, taken as a proxy for retail sales, are also expected to fall by 5% in May from a year earlier. The likely decline - 2nd this year - comes amid election-related uncertainties, completion of marriage season, and heat waves in several key markets especially Delhi NCR, said industry executives.

Automakers are expected to end May with wholesales or factory despatches to dealers of 340,000-350,000 vehicles, up 4-4.5% from a year earlier. As per dealers, planned shutdowns by some companies will help in moderating production volume and managing inventory.

"Pre-Covid stocks for the industry used to be in the range of 45 days. This has dropped to 2-3 weeks after pandemic. Industry stocks are high," said Hardeep Singh Brar, national sales head at Kia India. He expects sales to rebound after the new government takes charge. "Forecast for monsoons is good. Interest rates are expected to come down later in the year, with inflation under control. Given the high base for the entire year, sales growth is likely to be in low single digits," he said.

The domestic auto industry may end the month with a network stock of around 400,000 vehicles - the highest ever in absolute terms, said an industry executive who didn't wish to be named. "It even surpasses the months preceding the festive season when manufacturers bulk up stock," he said.

Brar expects industry car registrations to fall 10% sequentially in May though the Korean automaker will likely post growth backed by a refreshed product lineup. "We have no plans to adjust our production or dispatches, nor are we considering any discounts. Our products are competitively priced," Brar said. Maruti Suzuki and Hyundai Motor India didn't respond to ET's queries. Vinkesh Gulati, chairman, research, at Federation of Automobile Dealers Associations sees the ongoing "sluggishness to continue in June" and "the festive season, which kicks in October, will be a trigger" for a revival in demand.

"Automakers need to be cognizant and pare production and support with incentive and credit to balance things out," said Gulati. Owing to the high inventory levels, discounts and consumer schemes in June are expected to inch up by 15-20% compared to May, he added. Some carmakers have cautioned of slowing sales and rising inventory during investor calls earlier this month.

(With inputs from Sharmistha Mukherjee in New Delhi)