Inventories in some geographies has breached the unheard level of 100 days of stock as per today’s retail situation
Automotive dealers across the country are reporting high inventory days for their stock, as fewer customer inquiries convert to actual buys.
Retail sales, according to data from 75 percent of India’s 1440 regional transport offices (RTO), have seen an eight percent drop in all vehicle segments put together. The RTOs are responsible for a vehicle’s registration.
Sales of passenger vehicles (PV) dipped by 8.25 percent to 2.15 lakh in February, as compared to 2.34 lakh clocked in same month last year. During the same month, retail sales of two-wheelers (2W) went down by 8 percent to 1.12 million units, as against 1.22 million sold in the February last year.
In contrary to this, the Society of Indian Automobile Manufacturers (SIAM) said PV volumes recorded a fall of 1.1 percent while 2W sales went down by 4.2 percent in February. These are wholesales numbers (company sales to dealers) as against the retail sales (dealers to consumers) shard by Federation of Automobile Dealers Association (FADA).
Auto dealers across the length and breadth of the country have high stocks across all categories and inventory levels of PV and CV. There was a partial correction in the past two months, but stocks are now back to the unsustainable levels seen in November 2018.
From 35-40 days inventory (number of days the stock remains unsold with the dealer) during January, the industry has reported a sharp rise to 50-60 days during February for PVs, as per data shared by FADA.
Two-wheelers are the worst hit amongst the lot with inventory days soaring to a high of 80-90 days on a pan India average basis in February, as compared to 50-60 days in January.
FADA has been highlighting the high level of inventory for 2W dealers and has warned that stocks have now reached alarming proportions. In some geographies, the inventory has breached the unheard level of 100 days of stock as per today’s retail situation, the apex lobby body of dealers said.
The sharp rise in insurance costs, difficulty in securing loans, rising fuel costs and general dip in buyer sentiments have impacted retail volumes of vehicles, say market watchers.
FADA President, Ashish Kale said, “After a month of spike in PV sales in January which was largely due to year-end stock clearance getting extended and few new launches which generated some excitement, the industry is once again witnessing downward trend as February turned out to be one of the slowest month for auto retails during this financial year”.
Dealers are reporting their inability to secure funding for working capital as banks have tightened liquidity. In addition dealers have raised issues over payment rules of GST which the government amended with effect from February 1, 2019.
The amendment has led an additional requirement of working capital to the tune of Rs 50 Lakhs – 1 Crore for PVs and Rs 20-50 lakhs for 2W on a monthly basis for 15,000 Auto Dealerships across the country.
Given the current environment FADA urges the OEMs to take a realistic stock of the current retail situation and recalibrate their production to regulate dealer invoicing to facilitate return to stock normalcy for dealerships to maintain a sustainable business environment till the industry again hits the high growth trajectory.
