The inventory level for passenger vehicles across India is around 38 days now, and there should be a minimum inventory of 30-31 days, because as the festival season kicks in, the dealers should have enough capacity so that they don’t lose on sales, a top official at Maruti Suzuki India (MSIL) said.
Not only MSIL, other original equipment manufacturers (OEMs) such as Tata Motors, Hyundai Motor India (HMIL) and JSW MG Motor India are also working on similar days of stocks, so that they have enough supplies during the festival period.
Earlier this month, the Federation of Automobile Dealers Associations (FADA) said the inventory levels for PVs have surged to a historic high of 67-72 days, equating to ₹73,000 crore worth of stock, which poses a substantial risk for dealer sustainability, necessitating extreme caution.
Dealer failures
FADA has urged the OEMs to be vigilant about potential dealer failures due to the high inventory levels. It had also approached the Society of Indian Automobile Manufacturers as it was crucial for the Reserve Bank of India to mandate financial institutions to implement stringent checks before releasing inventory funding, preferably requiring dealer consent or collaterals to prevent the escalation of NPAs.
“Generally, 30 days is the inventory, which is a minimum requirement, because the network should be there, otherwise there will be loss of sales.
“During Covid, the shortage of semiconductors and supply issues surfaced, which brought the industry to very low inventory levels.
“So, compared to that it obviously looks very high right now. Ideally, the inventory level should be 30-31 days, but with the festival season approaching, the dealers need to keep the stock,” Partho Banerjee, Senior Executive Officer (Marketing and Sales), MSIL told businessline.
He said the company has now stopped the traditional way of sharing the dispatches and number of monthly sales (to dealers), and has shifted to sharing real registration of vehicles numbers based on the Vahan data from the Ministry of Road Transport and Highways.
Conscious call
He said the company has taken ‘a conscious call’ that it will not be unnecessarily dispatching more vehicles to its channel partners even if it has to measure the dispatch market share on lower side.
“We want to be in line with the retail so that we don’t push the metal from our factory stocks to the dealer stocks... the actual market share is the number of vehicles you are actually selling in the market, and the correct picture emerges from the Vahan market share (monthly data).
“So, as retail happens, automatically the dealers will be lifting the vehicles from our company stocks,” Banerjee said.
Upon asked about festival sales, he added that the company was keeping its fingers crossed for the August sales, which could be more or less similar to July sales, and hoped for good demand in the festival season starting from Onam, Janmashtami, Ganesh Chaturthi, and ending with Navratri and Diwali. According to Hyundai dealers, they are seeing a stock of two to three weeks currently, and are likely to maintain at similar levels in the coming months.
Re-adjusting
“Our current dealer inventory would be between 35 days to 40 days. Closely tracking Vahan registrations, we proactively re-adjusted our wholesales in line with retail to keep channel inventory under control,” Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, recently said in Q1FY25 investor call, recently.
According to FADA, the total domestic PV retail sales grew by around 14 per cent year-on-year with 3,20,129 units in July as compared to 2,90,564 units sold in the corresponding month last year.