60-day PV stock not a worry ahead of 'bumper' festival season: Fada

Dealers in India currently maintain an average passenger vehicle (PV) inventory of 60 days, and they are content with it right now as they anticipate bumper sales during the upcoming festival season, according to Manish Raj Singhania, president of the Federation of Automobile Dealers Associations (Fada), on Thursday.

“The stock with dealers has been steadily increasing in this financial year. At the beginning of this financial year, dealers had stocks for about 30-32 days,” Singhania told Business Standard in an interview on the sidelines of the annual Auto Retail Conclave. Dealers generally feel more comfortable with 30-32 days of inventory.

Fada calculates the festival season from the first day of Navratri to 15 days after Dhanteras. Last year's festival season lasted for 42 days.

Is an average 60-day inventory a concern for dealers?

Singhania replied: "We talked to our dealer members. In a recently concluded survey, 95 per cent of the dealers expressed optimism about the festival season. They don't want to miss out on the incremental demand that comes during this period."

"When we talked to our members, we questioned whether they wanted us to highlight this issue with PV makers. Right now, everyone is okay... If demand is good during the festival season, then the stock with dealers will come down to 30 days. If demand dwindles during this season, then it will be a significant cause for concern," he added.

Singhania said that during last year's festival season, dealers "missed the bus" because there was huge demand, but they didn't have enough vehicles.

"This time, dealers are proactive; they are picking up stocks," he added.

However, he clarified that dealers are receiving more stocks of companies' entry-level cars, which have lower demand than sport utility vehicles (SUVs).

"For Mahindra, it's the Bolero (the entry-level car). For Maruti, it's the Alto. For Hyundai, it's the i10. Those are sitting in stocks," he explained.

The situation is opposite in the two-wheeler sector. Dealers want more stocks, but companies aren't manufacturing enough, he noted.

Dealers in India currently have two-wheeler stocks for 20-22 days.

For the festival season, having two-wheeler stocks for 20-22 days is insufficient, and dealers should ideally have a comfortable stock of 30-40 days, he said.

"The original equipment manufacturers (OEMs) aren't able to produce the required quantity desired by the dealers. There is a shortage of vehicles there," he added.

Hyundai Motor India's Chief Operating Officer, Tarun Garg, indicated at the conclave that dealers should get comfortable with the post-Covid reality of holding a sizeable inventory.

Garg said dealers should understand that what has happened in the last two years is not going to be the "way of life" anymore.

"The times when there were just seven days of stocks and a six-month waiting period are over. You need to embrace this new reality and determine the right and optimal stock level. How can I (the dealer) return to the times when I encouraged my team to convert an inquiry into a retail sale? Many of us have become complacent and are in a comfort zone, expecting things to happen on their own," Garg concluded.