Auto dealers warn high inventories, financing costs may hit demand

Passenger vehicle inventory stood at 43-45 days despite record wholesale dispatches, FADA said, while expressing hope that strong festive-season retail sales would help reduce stock levels

Indian auto dealers warned on Friday that high inventories, rising financing costs and signs of rural ​stress could threaten post-festive demand despite record industry ​sales, with November retail sales key to clearing excess stock.

 

While automakers ‌have reported strong wholesale sales, dealers say the focus is shifting to whether retail demand can sustain growth beyond the festive season.

 

Fada said October retail sales were hit by a delayed festive calendar, with passenger vehicle registrations falling 14 per cent from a year earlier and two-wheeler sales declining 28 per cent.

 

"The inventory today is not a major concern, but if it remains at these levels by the end of December, it becomes a major concern because dealers ‌start losing money," Sai Giridhar, president of Fada, told Reuters.

  

Passenger vehicle inventory remained at 43-45 days in October, above the Federation of Automobile Dealers Associations' recommended 21-day level.

 

Giridhar said dealers were already seeing demand soften in some rural pockets affected by deficient rainfall, particularly in the two-wheeler segment, though he expects purchases delayed by the later ​festive season to support November sales.

 

Moreover, about 31 per cent of dealers reported a moderate or ‌material impact from higher financing costs and loan repayments, while repeated vehicle price increases had eroded much of the benefit ​from ‌last year's tax cuts, Fada said.

 

"If inventory continues at around 45 days, it ‌will put pressure on dealers and OEMs to give extra discounts and liquidate inventory," Giridhar said.

 

Fada's comments follow robust October wholesales, including ‌a ​record monthly sales ​figures for industry leader Maruti Suzuki, though analysts said part of the growth reflected inventory build-up at dealerships ahead of ‌the festive season.